Austrian School monetary theory

[lord edward coke]

Gold is not used as money today, and there seems to be no very strong movement to return it to that status. Ditto for silver. That isn't surprising. The power to create modern fiat money is awesome, and easily capable of influencing public opinion. Bankers hate gold, which they could not loan without first possessing, except for the short haul, until their dishonesty became apparent. Politicians hate gold, because to get it for their grandiose projects would require levels of taxation resulting in revolution. On the other hand, fiat enables them to tax "profits" which are, in real terms, losses, and to pay their bills, when they finally get around to it, in depreciated currency. This latter feature of fiat makes it attractive to private borrowers as well, and since fiat makes borrowers out of most of us, this masks the hurt of imaginary money.
Gold, we are told, possesses several shortcomings, which are invariably mentioned when the subject of a gold monetary system arises--which isn't often!

"What if we should run out of gold?" is the form given to the principal objection to the yellow metal as money. After all, the amount of gold is finite; sooner or later we might run out. True. Do we hear these same concerns about, say, molybdenum, or cobalt? Or even iron? What about concrete? Think of the millions of tons used every year just for highways! What if we ran out! Many decades ago there was a shortage of whale oil, which caused serious concerns in America. Most people depended upon it for lighting. What if we ran out? Well, we almost did. But then along came kerosene, which was superior, anyway. Saved in the nick of time! When, eventually, we exhaust our supplies of petroleum, we will have developed electric automobiles. Human ingenuity copes. Besides, there is nothing magical about gold, although its physical properties make it ideal as a medium of exchange. But should we need to, we could easily use platinum as money, or silver. But let's assume the worse: we are running out of gold, and there is, mysteriously, nothing we can substitute for it.

So what? Are the same people who are concerned about the possible shortage of gold, as money, concerned about the incessant growth of fiat money? Charts of the growth of the money supply are truly frightening: the line on the graph is going almost straight up! Isn't this worrisome? Those who seem willing to live with inflation of the fiat are worried unnecessarily about possible deflation of a gold-money.

If money became scarce, what would happen to the purchasing power of your savings? That gold, just sitting in your account, would acquire ever more exchange value. Retirement worries would ease, wouldn't they? Rather than seeing the value of your savings drop constantly through inflation, you would see it increase steadily through deflation! The money in your children's education account would become more and more valuable with time. Is this cause for alarm?

Yes, if money were gold, and no more gold were to be found, you might have to accept less gold (money) for your work. But the buying power of that gold would increase commensurately. With the present system, you can earn "more and more" for your labors (actually, just larger numbers on your paycheck; which numbers represent nothing. This, incidentally, makes high taxes endurable), but prices manage to go up faster than your income, so you find it hard to get ahead. The working man, paid according to a contract, would find that, at least during the term of his contract, he received the same amount of gold, while prices could drop during that time as gold became increasingly scarce. In other words, prices can change hourly; wages are fixed at least for the duration of a contract. This works against the wage-earner in a inflationary economy, but for him should deflation occur.

Ah, but why should we bother digging gold out of the ground when it's just going to sit in somebody's account? What a waste of time, and risk of life. As money, gold doesn't DO anything--it just sits there. Pieces of paper could do as well.

But if that were true, why aren't those pieces of paper doing as well? Why would we, even as a small minority, even consider using gold as money, if paper did the job as well? Ironically, a similar question is being entertained about paper money. Why bother making special, expensive, paper, and elaborately printing it with special inks and holograms, when blips in a computer can do as well? The answer lies in human nature. If you are giving your life, or at least forty hours of it weekly, for something, then it is satisfying, as well as just, that you get something. Some thing. Something you can hold and evaluate, weigh, and measure. If you had to perform certain tasks according to certain standards to get your money, isn't it reasonable that the money itself correspond to the standard for money, whatever that may be? Isn't it at least disconcerting that your life's work could be obliterated by a short circuit, or a bolt of lightening? Is this mere sentimentality, a refusal to accept progress? Then what of people who buy works of art for immense sums. They derive satisfaction from these artifacts, although they just sit--or hang--there. They don't "do anything." But their owners are pleased to have them, and no doubt part of their pleasure derives from knowing that their value will be maintained (if they chose well) regardless of what the currency does. Shouldn't the owners of money be entitled to the same satisfaction?

Consider the weights used by the pharmacist. If the prescription calls for 100 mgs of the drug, does he place on the balance a piece of paper marked "100 mgs?" Would that be the same size piece of paper he uses for 1000 mgs., except for the number written on it? Obviously, the weights and measures which keep our society operating efficiently are important, and necessarily precise. They don't do anything; or do they? So it should be with money. A certain job is worth a certain amount of gold.Your boss will check your work to see if it is satisfactory; you should be able to check your payment likewise. Of course, money needn't be gold. A complaint I frequently hear is "What's so special about gold?" Lots of things, actually, but whatever is used for money should be something: some thing. Otherwise, how do you know you've got it? Should you have to take the word of a stranger: "Yes, this check is good." Scary!

Finally, there is a political objection. "Lots of gold is found in Russia, or South Africa. Using gold as money would give these countries unwarranted power and influence over the rest of the world." Again, this question is never raised about fiat. Its creators most certainly have the whole world enmeshed in debt from which emergence is impossible, as they continue to collect the ever-growing interest. Moreover, they create the money they lend with the stroke of a pen. Russia and South Africa, however, cannot create gold, and if they want the good things of the more advanced societies, they will have to part with their gold to get them. What would be the point of living in primitive conditions, while sitting on tons of gold?

All in all, the defects of gold might well be considered its advantages!

[lord edward coke]

http://www.thenewamerican.com/economy/economics-mainmenu-44/627-a-crisis-of-dollars-and-sense

The US CON requires "just weights and measures". The original debt contract was denominated in dollars. And as the law shows, the REAL DOLLAR has not changed in its measure since 1792. However, if the debt WAS abolished (duck!) - and usury was outlawed (run and hide!), there may be a transition period where the government would have to sort out the various monetary systems.**

[2] Natural resources, as a subset of the set of all goods and services, cannot operate as a medium of exchange or an abstraction for value. This was extensively discussed previously:
http://goldismoney.info/forums/showp...3&postcount=61
http://goldismoney.info/forums/showp...5&postcount=44

[3] If you refer to private promissory notes, denominated in goods or services (not money!), issued by productive people who can redeem their notes - I agree.
However, credit extended, at usury, only payable in money, is NOT acceptable.

[3.A] Usury is mathematically impossible to pay, and should not be protected by law. Ergo, no private or public instrumentality should condone, approve or consent to usury in any form.

[4] See:
http://goldismoney.info/forums/showp...10&postcount=1

** Various monetary systems:
Lawful money : gold / silver coin *(and fractional coin), not subject to excise tax on transactions.

Current monies : repudiated debt instruments (FRNs) and counterfeit fractional coin - liable for excise tax on transactions (retail sales tax).

Private promissory notes, i.e. coupons : Not lawful money, and have 1/20 cent face value, but will act as a medium of exchange, to facilitate trade, and not subject to an excise tax. Denominated in goods and services, not money tokens.

The "Day After", folks will have to reset prices, if denominated in REAL dollars to sums about 1/1000 of current "dollar bill" to reflect the relative scarcity of real money.
But there will be a negotiable exchange of worthless notes (subject to taxation) as well as private commodity notes (coupons).

A 40,000 FRN Chevy Volt ==> $40 (2 ounces gold coin)
(Remember, the percapita share of Gold is less than 1/2 ounce!)

However, the equitable trade value of private promissory notes in reference to a Chevy Volt will resolve to something akin to total labor value and materials cost plus a reasonable profit margin. THAT will be the "NEW" way of establishing equitable trade, absent usury and variable money tokens.

For example, American auto makers, on average, consume 20.7 direct labor hours per vehicle.
For equitable trade, with a ten percent profit margin, would cost the customer about 23 labor hours.
Currently, labor costs are roughly 10% of the retail price. The remaining 90% is skewed by usury, and socialist taxation. For this thought experiment, we'll compromise and assume that labor accounts for 20% of the "adjusted" price.
Therefore the indirect labor costs for materials, research, design, etc, computes to 115 hours of equitable value trade.

In short, a highly skilled / highly productive laborer's note denominated in 115 hours (3 weeks) would trade for a shiny new automobile. For an unskilled / unproductive worker, the equitable trade may vary as much by a factor of 4 - over 400 hours (Ten weeks).

I think that illustrates the huge gap between what we pay, thanks to national socialism and usury overhead, and what we get for our undervalued labor.

It also shows how much equitable value that barter (and private notes) can account for, to our mutual enrichment and prosperity.

[P.S. - since the Federal government cannot object to the tender of their own notes, in tender for discharge of taxes, FRNs will have an important function - paying taxes. But when the government uses them to "buy" from the marketplace, their value may be FAR BELOW 1/1000 face value. In short, the buying power of the "Federal Budget", based on trillions of FRNs, may only be on the order of millions of real money. ]

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http://www.youtube.com/watch?v=s1UT2Ms5E2k&feature=player_embedded

http://www.youtube.com/watch?v=F9PSYkWIuIs&feature=player_embedded

[planning4acrash]

Gold is not used as money today,

1ounce gold Britannia has a face value of £50 Sterling. Sellers can legally reduce their prices to bring them inline with spot gold and use the gold coin as legal tender, which it is.

Are you suggesting that gold coins are not legal tender?

[lord edward coke]

Legal Tender Act (1862). To provide funds to carry on the Civil War, Congress found it necessary to issue fiat money. By the act of 25 February 1862, and by successive acts, the government put into circulation about $450 million of paper money dubbed "greenbacks." These acts did not set aside any specific gold reserve to back the paper issue, nor did they announce any date when greenbacks could be redeemed for hard currency. To insure the negotiability of the new paper currency, Congress declared these notes legal tender in "payment of all taxes, internal duties, excises, debts, and demands of every kind due to the United States, except duties on imports, and of all claims and demands against the United States … and shall also be lawful money and legal tender in payment of all debts, public and private, within the United States." Wall Street and the metropolitan press opposed this measure, fearing runaway inflation. On the Pacific coast people frequently evaded the law through the passage of acts allowing exceptions on the basis of specific contracts. By imposing a wide range of taxes, however, Congress generated a steady stream of revenue into the federal treasury, inspiring confidence in the Union's ability to pay its debts and offsetting some of the inflationary characteristics of paper currency. In 1870 the Supreme Court declared the Legal Tender Act unconstitutional and void in respect to debts contracted prior to its passage, but after two vacancies were filled, the Court reversed its decision.


Legal Tender Act: Information from Answers.com     http://www.answers.com/topic/legal-tender-act

the courts have struck this down because congress made frn's 'legal tender'

the 10th amendment, if the changes infringe on the established powers of the feds, or the people.


look at what the feds did when they created the us citizen. They created an entity that they rule over. They've made the us citizen their subjects. the feds are the creator, and the us citizen is the created, yet "we the ppl" are the creators, and the feds are the created.
__________________


http://www.youtube.com/watch?v=E3m-gOelA8g

[lord edward coke]

http://www.youtube.com/watch?v=j9IkvUHlBXE&feature=related

In his 1850 Disquisition on Government, John C. Calhoun argued that a written constitution would never be sufficient to contain the plundering proclivities of a central government. Some mechanisms for assuring consensus among the citizens of the states regarding "federal" laws would be necessary. Consequently, Calhoun proposed giving citizens of the states veto power over federal laws that they believed were unconstitutional (the "concurrent majority"). He also championed the Jeffersonian idea of nullification. To Calhoun (and Jefferson), states’ rights meant that the citizens of the states were sovereign over the central government that they created as their agent, and could only be so if such mechanisms – including the right of secession – existed.

Without these political mechanisms the forces of nationalism, mercantilism, and political plunder would relentlessly reshape the Constitution with their rhetoric, and their efforts would eventually overwhelm the strict constructionists. At that point the Constitution would become a dead letter.

In his new book, The Constitution in Exile, Judge Andrew Napolitano explains in very clear language just how prescient Calhoun was. The biggest special-interest group of all – the federal government itself – has "seized power by rewriting the supreme law of the land," as Judge Napolitano says in the subtitle to his book. Just as Calhoun predicted. The purpose of the book, says the judge, is to tell "the unhappy story of liberty lost, federalism trampled, and Big Government run amok." How did we get to the point, he asks, of where the "federal" (i.e., central) government defines for us the drinking age for alcohol, how much wheat farmers can grow, the ability of terminally ill cancer patients to medicate themselves with marijuana, the amount of sugar that can be used in ketchup, and even the size of toilets?

Unlike the neocons who surround Judge Napolitano in his appearances on the FOX News Channel, he understands that freedom comes "from God and is inherent to our humanity . . ." "Freedom" is not derived from military adventurism under the guise of phony humanitarianism, as the David Horowitz/William Kristol/Rush Limbaugh/ crowd would have us believe. (For an amusing rendition of this fascistic theory take a look at the web site of the "David Horowitz Freedom Center").

Judge Napolitano is one libertarian who is not intimidated by the forces of political correctness, a defining feature of so many "beltway libertarians." Consequently, he is not afraid to recognize the truth about the American founding: "The states were sovereign entities that the Continental Congress could not directly control. Essentially, there was no binding central government" Even better, "Congress could not tax the people of the United states (Ah, the good old days!)" Advocates of centralized governmental power have long falsely associated statements about states’ rights with racism and slavery, which has intimidated most beltway libertarians, but not Judge Napolitano.

After a lucid explanation of each section of the Constitution the judge discusses how the nationalist/mercantilist coalition, led by Alexander Hamilton and his accomplice Judge John Marshall, conspired to effectively rewrite (and undermine) the Constitution almost as soon as he ink was dry on the original copy. The "Federalists" (who would eventually morph into the Whigs, and then the Republicans) never accepted their defeat in the Constitutional convention (which created a federal, not a national government). Nor did they accept Jefferson’s election as president. Thus, two days before his term ended the Federalist President John Adams appointed dozens of "midnight federal judges" and appointed John Marshall to the Supreme Court on March 3, 1801, one day before he would leave office. Marshall "spent the remainder of his career finding clearly disingenuous, historically inaccurate, and highly questionable justifications for ruling that federal power is not limited," writes Judge Napolitano.

In his most famous decision, Marbury vs. Madison, Marshall gave the federal judiciary the power to rule on the constitutionality of both statutory law and the behavior of the executive branch. "[T]his means that the Supreme Court granted itself the authority to declare the will of the people . . . null and void . . ." This of course has caused endless mischief and tyranny. This principle of a monopoly in reviewing constitutionality was not widely accepted, however, until after Lincoln’s war of 1861–1865 destroyed state sovereignty once and for all. Until that point, many Americans believed that the citizens of the states, as well as the president and Congress, should have equally legitimate claims on interpreting the Constitution. As President Andrew Jackson famously said, "John Marshall has made his decision, now let him enforce it if he can."

Marshall and his fellow Federalists, such as Justice Story, also paved the way for the Supremacy Clause of the Constitution. This clause only grants "supremacy" to the central government on the seventeen specific functions of the central government that are delineated in Article I, Section 8, period, many of which have to do with waging war and foreign policy. This power has been grossly abused by implying that the central government is somehow "supreme" in anything and everything vis-à-vis the citizens of the states. This of course is a perfect recipe for tyranny.

Judge Napolitano recognized that it was Federalists like Joseph Story and John Marshall, and later Whig politicians like Daniel Webster and Abraham Lincoln, who would tell The Big Lie that the Constitution was ratified by "the whole people" and not as it actually was – by the citizens of the sovereign states, with their representatives assembled in state conventions. "That was both historically incorrect and intellectually dishonest," says Judge Napolitano.

According to this false view of the American founding the central government was always the master, not the servant, of the people. This, too, is a perfect recipe for tyranny that has been made by tyrants everywhere (Hitler even invoked this argument in Mein Kampf to make his case for destroying state sovereignty in Germany).

In McCulloch vs. Maryland Marshall enshrined into law Hamilton’s dangerous (to liberty) notion that there were supposedly "implied powers" in the Constitution. He did this in order to justify a central bank, which is mentioned nowhere in the Constitution under actual powers. This created the situation where the powers of the central government were only to be limited by the imaginations of federal politicians. Judge Napolitano proceeds to describe myriad examples of this, from the PATRIOT Act ("a lawless law because it allows the federal government to obtain information without a warrant, thus violating the Fourth Amendment") to census snooping, television regulation, and hundreds of other major and minor power grabs.

By far the most brilliant chapter of The Constitution in Exile is chapter four, entitled "Dishonest Abe: The Lincoln You Didn’t Know." Here the judge recounts how, "In order to increase his federalist vision of centralized power, ‘Honest’ Abe misled the nation into an unnecessary war." And, "with very little regard for honesty, Lincoln increased federal power and assaulted the Constitution. His actions were unconstitutional, and he knew it." Moreover, "Lincoln’s view was a far departure from the approach of Thomas Jefferson, who recognized states’ rights above those of the Union." He goes on to present chapter and verse of the abuse of the constitution and the consolidation of political power in Washington that took place during and after the Lincoln regime. "Lincoln increased the power of the federal government at the expense of the rights of the states and civil liberties. This opened the door to more unconstitutional acts by the government in the 1900s through to today." The judge also recognizes that all other countries in the world ended slavery peacefully, which could have happened in the U.S had the slaves not simply been used as political pawns by the neo-federalist Republican Party to achieve its main goal, the consolidation of political power in Washington and the destruction of citizen sovereignty. "The next time you see Lincoln’s portrait on a five-dollar bill," writes Judge Napolitano, "remember how many civil liberties he took away from you!"

Thanks to the final victory of the Federalist/Whig/Republican cabal continued to enhance governmental power and diminish liberty by perverting the Commerce Clause of the Constitution in the post-war years in ways quite familiar to many LRC readers. By the late nineteenth century, the monopolistic federal judiciary began attacking capitalism in the name of regulation that supposedly served "the common good." The judge is wise enough to understand that capitalism itself serves the common good, and that regulation more often than not is the result of special-interest politics. These attacks intensified during the New Deal, which "codified socialism, evaded the Constitution, disregarded the Natural Law, and put individualism on the path to extinction."

And here’s a shocker: "Between 1937 and 1995, not a single federal law was declared unconstitutional by the Supreme Court. Not one piece of legislation was seen as exceeding the scope of Congress’s commerce power." (Emphasis added). So much for the phony argument that "judicial review" by the federal courts acts to protect liberty. Instead, it does the opposite: It expands the size and scope of government at the expense of liberty. This sad story is told over the course of several of the latter chapters of The Constitution in Exile.

The back cover of Judge Napolitano’s book has blurbs from such high profile neocons as Bill O’Reilly, Sean Hannity, and Rush Limbaugh (as well as civil libertarian Nat Hentoff and liberal commentator Alan Colmes). I doubt that the neocons on this list ever read the book, however. In a chapter entitled "After 9/11" the judge writes that "The PATRIOT Act and its progeny are the most abominable, unconstitutional governmental assaults on personal freedom since the Alien and Sedition Acts of 1798" and "the most unpatriotic of the things that the Bush administration and this [Republican controlled] Congress could have visited upon us." (These "most unpatriotic of things" are what O’Reilly, Hannity, and Limbaugh have spent hundreds, if not thousands, of hours defending on their respective television and radio shows.)

And it is indeed unpatriotic and traitorous to the Constitution to support current policy, which is that "federal agents and local police can write their own search warrants, serve them on American financial institutions without the intervention of a judge, and obtain information about you without you even knowing it!" The PATRIOT Act "has allowed the government to circumvent completely the Fourth Amendment" and "makes it a crime – punishable by five years in jail – for the recipient of a self-written search warrant to tell anyone that he or she has received the search warrant." These rats know that they are rats.

It gets worse. "The government can now . . . break into your house . . . steal your checkbook, put an electronic bug under your kitchen table, and make it look like it was a house burglary. It can even leave and not tell you or the local police what has happened."

Dub-Yuh is recognized as the tyrant and dunce that he is: "President Bush does not recognize the constitutional limitations imposed on his office. His only concern is with victory over ‘the enemy,’ whoever that may be. "

So what can be done? Among Judge Napolitano’s common sense recommendations are abolition of the income tax ("the Sixteenth Amendment . . . should be abolished outright"); same for the Seventeenth Amendment which called for the direct election of U.S. senators and a return to the system of appointing them by state legislatures; and the recognition that the federal government will never check its own power. "Thus, I would clarify the right of the states to secede from the Union," writes the judge from New Jersey, "losing all the benefits that come from membership [in the union], but regaining all the freedom membership has taken away.

The U.S. government is now characterized by dictatorial power, abuse of every kind of personal liberty, confiscatory taxation, economic fascism, dangerous militarism, and imperialism. Every American who is concerned about this Nazification of the American government needs to own a copy of The Constitution in Exile.

http://www.youtube.com/watch?v=xVJ6JR4OeiU

[freedom_commonsense]

The Rothschilds do not own all the gold or even close to it. Most of it is still in the ground, in the ocean, and in private hoards. Even if they did own all of it that presently is in the form of bars, that would just drive up the price and stimulate gold mining so that new supplies would quickly come into production – as now is happening around the world. When the price hits several thousands of dollars per ounce, it will be profitable to extract it from the oceans, and there is a limitless supply from that source. It's just a question of the natural balance between supply and demand - without a committee of politicians and bankers drafting a magic formula and using coercion to redirect human resources.

Bankers may hoard gold (because they understand its value more than most people) but they have always done everything possible to prevent a gold-backed currency. If they wanted it, they could have had it long ago, but (as you may have noticed) they always have worked against it. Why is that? It’s because they can acquire far more wealth by expanding the money supply at will and collecting interest on money created out of nothing than they can by having limits on their money supply and collecting interest on a much smaller amount of gold-backed loans. Bankers love to possess gold but they hate a gold-backed currency because that limits their money supply and, thereby, limits the volume of loans.

Any system other than precious metals is dependent on human decree and manipulation. It must inevitably end up no different than any other fiat money. I am familiar with the social-credit scheme and find it lacking in merit. It is a social engineer’s fantasy. It does not line up with human nature.

Gold has always worked well as a monetary base throughout history. It can’t be improved upon. We must not fall for the line about gold being just a pretty metal, etc. It has intrinsic value even if not used for money, it does not deteriorate, it can be divided into small units and recombined again if necessary, it is scarce so it has great value in a small space, and, best of all, it can be precisely measured for purity and weight, which allows for units that are beyond human judgment and human manipulation. It is the perfect money.

This is an answer on monetary standards posted by G. Edward Griffin on www.freedomforceinternational.org.

I wondered what you guys here make of it?

[planning4acrash]

I agree with him. And in anycase, the folk who say "we shouldn't let people have gold money coz the Rothschilds ave it" fall into the mistake of social control, accepting the evil of socialism.

In a free market, people would choose a basket of real commodities and synthetic derivatives to store and transfer wealth. The only problem with derivatives is that bankers committed accountancy fraud by treating them on the balance sheet as assets when they are infact liabilities, because they represent promises to pay, risk and opportunity costs. Synthetic derivatives, isolated on the liabilities side of the balance sheet actually cut off liquidity by ensuring that resources placed in promises to pay (derivatives) cannot be used used as collateral for borrowing.

So, if I was a farmer, I may choose to hold 60% of my wealth in gold, 10% in silver and 30% in grain storage and futures contracts for my grain to fund future production.

Derivatives are so healthy treated as liabilities because they let traders buy forward production if they anticipate price rises or shortages. The very act of buying forward then shifts investment into future production, thus letting the anticipation of shortages fund the avoidance of potential shortages thus, a non-fraudulent free market is a self correcting, beautiful machine.

Unfortunately, folk like Tarpley say ban derivatives but of course, if we do that, traders cannot and fund the avoidance of anticipated future shortages and they cannot achieve the stability and certainty of securing future production. Thus, in a free market, storage of wealth in derivatives, basically, placing savings in futures contract as a hedge against inflation and uncertainty would be a big factor both in the household and for a business thus, it is ridiculous to go on a full on gold standard. But, we must avoid any state sponsored monopoly, because that is what spurs abuse and it is what devalues alternative forms of currency.

[planning4acrash]

Money is like any other commodity. Just as the cook must purchase a grain that most suits their economy, cooking demands, taste and what not, so too should money be a free market commodity where people can choose the most appropriate money for their needs.

The characteristics people seek from money include:

durability, transportability, recognizable, divisible, fungible, scarcity and good for transaction, and or hoarding. For example, silver is great for transacting due to its lower value, whilst gold is better for hoarding because of its higher value per weight, which brings down storage costs. It is of course silly to store copper coins to any discernible value and storage of things like grain can be of limited use for most but useful to others.

Historically, gold has best suited that requirement, but it does not do so for every circumstance. Hense the need to take a lead from Ron Paul and call for the end of legal tender laws to create a free market in money production and usage, with government's role simply being to protect the pubic from fraud.

mises.org for more info.

[planning4acrash]

Except I'd have to do 40 hours worth of labour (given the current market) just to be able to buy a single sovereign in the first place... does that sound right to you?

Well, that would be under minimum wage so, of course its expensive, but you are buying an asset that won't depreciate, but people's wages are depreciating. You can always get 1/10 ounce Britannia's or 1/2 sovereigns. Junk silver is also great if you are poor.

With gold, it doesn't matter how much you purchase, all that matters is that you get out of paper before it devalues.

Gold has always been expensive to purchase. Inflation adjusted its nowhere near its 1980 peak.

But the only relevant question is, can you trust gold more than your government. Everything else pales in significance.

[lord edward coke]

http://www.youtube.com/watch?v=eb1n1X0Oqdw

They called us "kooks" and "crackpots". They said our ideas were outdated and incompatible with modern finance. They said it wouldn't last. Oh yes, Gold, they said, was a silly investment with no inherent value, and soon, precious metals investors would be "wiped out" by the "inevitable implosion of the gold bubble" (gold bubble....?). Mainstream establishment economists and Keynesians have been yipping and snarling like overanxious Chihuahuas for the past two years against gold and silver, most specifically their use as a hedge against collapse in stocks and currencies.

The vitriol they have aimed at PM's and PM enthusiasts, though, borders on the obsessive. If we are all "crazy survivalists" and Y2K'ers, then why bother with us? Wouldn't the folly of our financial strategy be blindingly evident to the majority of investors if we really are all madmen waiting for the seas to boil? If there is no chance of monetary implosion, why bother to plead and beg with the average American NOT to buy gold? Why invent wild generalizations and stereotypes of precious metals investors to dissuade the public from examining our model for economic security? Wouldn't the mere passage of time prove us inaccurate? What is it about gold that frightens them so.....?

As it turns out (and just as we expected), gold and silver have held strong and even made record gains. Gold is one of the top performing investments of the decade, rising over 277% in value from 1999 to 2009:

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7375415/Gold-is-decades-best-performing-investment.html

All while the media published assassination attempt after assassination attempt, lashing out at gold in a vain effort to dissuade the masses from even considering any option outside stocks and the dollar. Their dismay at gold's meteoric rise is evident, and there are many reasons why they were unable to predict it. One; establishment economists are used to a particular status quo, a certain narrow way of looking at the ebb and flow of the economy. They have lost all ability to imagine or comprehend unique scenarios. When confronted with a problem or environment that is new, or beyond the scope of their experience, they lose objective footing, and simply deny that the situation exists at all. Two; gold is the bane of any system based on fiat money creation and centralized financial control. Precious metals represent competition to paper currencies as well as an alternative that protects against the hidden tax of inflation. Possession of gold allows one to be independent, or "off-grid", in the fiscal sense. Establishment analysts are commonly taught during their formative years in university to ignore or even despise the idea of a gold standard, producing an army of talking head economists who parrot the global elitist ideology. Three; for years, naked short selling of PM's, and the overselling of metals securities (paper stocks representing gold and silver that the banks don't actually have), has been used by the banking elite to suppress gold and silver prices. Recent exposure by whistleblowers, with the help of organizations like GATA, are beginning to lay open this fraud, while foreign central banks have been stockpiling gold unabated for the past year-and-a-half at least. Demand for physical is beginning to overwhelm the big banks and their ability to manipulate paper securities. The dynamic of the market is changing, and mainstream investment forecasters are falling far behind.

We believe that the fundamentals today show that this is just the beginning for precious metals and that they may soon play an essential role in events to come...

Gold And Silver Break Into The Mainstream

Precious metals are making waves in mainstream investment lately, and this has establishment cronies and apologists on the war path, making wild and unsupported statements about gold and silver. This segment from CNBC's ‘Closing Bell Exchange' hosted by Maria Bartiromo is a prime example of anti-gold propaganda, in this case aimed at Ron Paul, of course:

http://www.youtube.com/watch?v=Qhe5Jc0RgzM&feature=player_embedded

The man making the attacks on Paul in the video above is Ron Insana, who ironically, tried to start a hedge fund company in 2006 after leaving CNBC, only to run it into the ground less than two years later. Investors who sunk money into Insana's company received a -5% return. Insana charged his investors "management fees" during his fund's operation, which means, not only did he lose their money, he also charged them for the opportunity to lose their money! And now, we are supposed to take the advice of this financial hack over the advice of Ron Paul, who predicted the subprime collapse years in advance as well as the subsequent recession, and the skyrocketing price of gold? How would you have fared if you had invested on Ron Insana's advice vs. Ron Paul's advice? Read more here:

http://www.economicpolicyjournal.com/2010/06/ron-insanas-brutal-attack-on-ron-paul.html

CNBC's Maria Bartiromo has since run with the anti-gold rhetoric on her show, accusing Ron Paul of a "conflict of interest" in his quest for a gold standard because he also owns gold (Ron follows his own advice. This should be respected, not ridiculed). Bartiromo, as far as I can tell, knows little to nothing about real economics, but the mainstream media, especially in the field of finance, is commonly overrun with incompetent people who are willing to tow the global corporate line for a paycheck. CNBC's ratings, by the way, have suffered record declines in the past couple years. It won't be long before these people are only talking to themselves:

http://www.zerohedge.com/article/annual-decline-cnbc-viewership-accelerates-down-37-overall-viewers-category

Despite the yammering of media clowns, many in the general public are turning towards gold as a viable option for protection of savings. The World Gold Council has predicted according to current trends that gold demand will be very strong for 2010, not just by central banks, but by private investors as well:

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2010052773525

China's gold demand is projected to increase by 50% in the next ten years (a conservative figure in my opinion). Last year, China alone accounted for 11% of global gold demand:

http://www.commodities-now.com/news/metals-and-mining/2164-chinese-demand-for-gold-to-double-within-10-years.html

Since around 2007, gold bullion (physical gold) is now outperforming gold stocks (paper gold). There is now a very discernable divergence between the values of paper gold stocks and the physical metal:

http://www.marketoracle.co.uk/Article20056.html

There are many reasons for this decoupling, but I believe the main cause is the fact that more and more people are demanding physical delivery of their gold instead of allowing their investments to remain as abstract ‘securities' which exist in writing only. More investors are beginning to dump their holdings of paper traded gold and mining stocks and are now buying coins and bars, which is why the price of physical is dominating over stocks. This is supported by reports of gold shortages across the world.

In the UK, dealers are struggling to meet gold coin demand:

http://af.reuters.com/article/metalsNews/idAFLDE6571T720100608?sp=true

And German dealers are snapping up disappearing gold Krugerrands as fast as possible in light of the EU's sovereign debt crisis and the falling euro:

http://www.zerohedge.com/article/local-gold-inventories-depleted-panicking-german-dealers-stage-run-krugerrands

Gold bullion demand has led to increased need for storage. Vault operators world wide are now straining to meet the new requirements for protected storage space:

http://goldnews.bullionvault.com/gold_bullion_061520103

Total announced gold ETF holdings now exceed total world production, while global mining output of gold is falling rapidly (ETFs are supposed to stockpile gold bullion, as opposed to ETNs, which use derivatives, however, there is evidence to suggest that some ETFs claim to hold gold reserves they don't actually have) . South African mines have seen output drop by 50% or more over the past ten years. What this means is that by a simple function of supply and demand, gold should leap in value over the next year. The Swiss asset management firm UBS has now predicted gold will rise to $1500 an ounce in the next six months:

http://goldnews.bullionvault.com/gold_price_061420105

Of course, this prediction would be correct only if current economic instability remains steady, and does not accelerate. If the situation becomes even more untenable (which is likely), gold and silver could jump to levels never before seen by modern markets. The current fervor for precious metals and the protection they provide is only the beginning...

Inflation Or Deflation?

Ever since the recession/depression took hold of the U.S., economists and analysts from around the world have predicted that one of three possibilities would result. Some have forecast a V-shaped recovery, or even a "jobless recovery". It is obvious now that a V-shaped recovery is a pipe-dream, and there is no such thing as a recovery without job creation to provide support. The other group (those who realize that we have only seen the onset of this collapse) is split into two camps; Inflationists and Deflationists.

Traditionally, those who believe inflation is imminent pull away from Dollar based investments and turn to PM's as a hedge against currency devaluation. Deflationists on the other hand, usually believe that the Dollar will maintain or increase its value and that commodities like gold will fall in value along with everything else. Problems arise though in this dynamic because there are many variations of "deflationary theory" and "inflationary theory", not to mention about as many definitions for inflation as there are economists. Even those who agree that there will be inflation often disagree on the form that inflation will take.

This confusion has arisen, I believe, because we are confronted with a fiscal conundrum no one has ever faced before, composed of elements that have occurred in the past, but never occurred together in the same event. We are seeing functions of both deflation and inflation working in tandem during the same crisis, and unfortunately, they do not cancel each other out! We are seeing capital destroyed by malfunctioning and toxic debt securities, which have caused deflation in jobs and markets, yet prices on goods including food and energy have increased 18.7% from March 2009 to March 2010:

http://www.breitbart.com/article.php?id=CNG.f4ca4a183df2102e9ad9338f1c9b7c75.171

This shows that while deflationary elements are in play, we are not seeing an event similar to the Great Depression of the 1930's. We are seeing something much worse. This may be partly due to the fact that America is far more financially interdependent with the economies of other nations today. In the 1930's, America was an independent manufacturing powerhouse with a mostly closed system. Now, we are a 70% consumer based society with little manufacturing capability on our own soil and trapped in unsustainable debt to nations like China who do not necessarily have our best interests at heart.

In fact, China's recent announcement that the Yuan will now depeg from the Dollar signals trouble for U.S. Treasury Bonds. With a stronger Yuan and a shrinking trade deficit with the U.S., they will no longer need or want to continue purchases in American debt:

http://www.reuters.com/article/idUSTRE65I2Z420100619?type=ousivMolt

As the Chinese currency appreciates in value, it is likely they will dump their holdings of our T-bills in response. This would cause severe devaluation of the dollar, and it is a development we have been warning about for years. The only question now is, how quickly will China get rid of U.S. Treasuries?

When the Great Depression hit, markets, jobs, and wages fell, but so did prices on goods. We did not turn up the printing presses and monetize our debt unabated during the depression, which is what the private Federal Reserve IS doing today. So far, it seems the Fed has no plans of ending this printing anytime soon, and without a full audit of the central bank, there is absolutely no way of knowing exactly how many Dollars are circulating in the world. We can only estimate, and hope.

I feel it is likely that as the collapse progresses, we will have to deal with a combination of obstacles. We could see deflation in stocks, jobs, wages, real estate, and capital, while at the same time face a falling Dollar and rising prices on goods. The EU is suffering from the symptoms of this new brand of financial anarchy, with falling markets and real estate, but without the advantage of falling prices on goods because of the weakening Euro. Consumer prices in Greece and Spain continue to rise even though they are in the midst of a deflationary spiral:

http://www.businessweek.com/news/2010-06-08/greek-may-consumer-prices-rise-on-higher-fuel-drinks-update1-.html

http://news.xinhuanet.com/english2010/business/2010-05/28/c_13321462.htm

But where does gold fall in all of this? Gold has flexed its muscles during this implosion, proving it can withstand both deflationary and inflationary factors. PM's are sought after in the EU, Asia, and the U.S. and are breaking free of their traditional relationship to markets and paper currencies. Basically, gold and silver are acting like currency again, as they did less than a hundred years ago, instead of just commodities, as they have in the past few decades.

Will gold suffer drops in the near future? Of course. But one has to look beyond the next quarter and examine the long term trend of an investment. For gold, that trend has been phenomenal the past ten years and shows no signs of abating. How many people foolishly claimed that gold would never top $500, $600, $700 an ounce, etc.? Regardless of inflation or deflation, no one in their right mind can deny that precious metals have been sound protection.

Why Buy Gold And Silver?

Buying a stack of gold coins is more than an act of wealth protection. It's more than just an investment. It is a social and philosophical statement. When you buy precious metals, you defy the restrictive nature of central banking and fiat currency. Paper money has never been OUR money, it is the establishment's money, and always will be. Gold offers us an opportunity to hold our own money, on our own terms. The more widely used gold and silver become, the less dependent we are on Federal Reserve paper, and the less power they have over our financial life. If everyone used PM's, the elitist central banking system could conceivably disintegrate. Buying gold is an act of monetary revolution, a revolution that is necessary if we are to save this country.

I have heard the argument in the past that during social catastrophe, gold and silver are meaningless compared to bullets and bread. This is partly true. No currency should ever take precedence over survival. However, no modern economy can grow on barter alone. A return to the village square would be an admirable start in the process of wrestling power from global banks, but for the economic maintenance of an entire nation of people, a stable common currency grounded in tangible wealth is also absolutely vital. Gold and silver have been and probably always will be the best way for us to decentralize economic control yet still preserve a national financial structure that lends itself to progress. At the height of a collapse, PM's can provide a stop gap for purchasing of goods when paper money has lost all allure. Their use may decline after a meltdown, but collapses heal over time, and rebuilding always requires the induction of a new and solid currency, usually made of PM's or backed by PM's.

Gold is now in the international view and is liable to stay there for years to come. The next step would be to begin trading gold and silver as currency again in a new liberty based economy free from the one we are forced to live in now. Such an endeavor would require men with some financial clout, ingenuity, honesty, and the courage to defy the globalist system. It would also require today's investors to STOP buying paper gold stocks and derivatives like ETFs, ETNs, and CEFs. Until all investors demand physical delivery of their metals, the manipulation of the gold and silver markets by banks such as JP Morgan will never end. In this way, we could preempt the engineered collapse of the fake globalist economy with the formation of our own internal economy, and perhaps even soften the terrible crash to come.

I have said it before and I'll say it again; a truly free man seeks to provide for himself and provide for the people what the system does not. Eventually, the system will have to try to stop him. If the system cannot stop him, it will have to conform to him, or find itself obsolete in the minds of the masses. Precious metals offer us a valuable avenue in making our existing oppressive system of fiat and debt obsolete.

[freedom_commonsense]

Well, that would be under minimum wage so, of course its expensive, but you are buying an asset that won't depreciate, but people's wages are depreciating. You can always get 1/10 ounce Britannia's or 1/2 sovereigns. Junk silver is also great if you are poor.

That's why I calculated that as under minimum wage, because I expect devaluation (in addition to "professional" jobs now having unprecedented competition for what's left of them). Sadly my intelligence is likely to be wasted on box-stacking thanks to things like occupational licensing and the focus on degrees\lack of employer-led training in new fields.

With gold, it doesn't matter how much you purchase, all that matters is that you get out of paper before it devalues.

I barely have enough to buy food and pay my rent\bills. I can assure you that if I did have any significant quantity of paper money I'd have done something with it by now  

Gold has always been expensive to purchase. Inflation adjusted its nowhere near its 1980 peak.

I'm not denying it's held its value. Let me explain my reasoning in the next point..

But the only relevant question is, can you trust gold more than your government. Everything else pales in significance.

No, and no - I trust neither of them. I'd rather buy non-perishable food. There are nearby reservoirs good enough for water, but if the the metaphorical crap hits the fan, I'm going to need food first...

[lord edward coke]

New-York, January lst, 1831.
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CONSIDERATIONS, &c.




THE framers of the Constitution of the United States were deeply impressed with the still fresh recollection of the baneful effects of a paper money currency, on the property and on the moral feeling of the community.  It was accordingly provided by our National Charter, that no state should coin money, emit bills of credit, make any thing but gold and silver coin a tender in payment of debts, or pass any law impairing the obligation of contracts ;  and the power to coin money and to regulate the value thereof, and of foreign coin, was, by the same instrument, vested exclusively in Congress.  As this body has no authority to make any thing whatever a tender in payment of private debts, it necessarily follows, that nothing but gold and silver coin can be made a legal tender for that purpose, and that Congress cannot authorize the payment, in any species of paper currency, of any other debts but those due to the United States, or such debts of the United States as may, by special contract, be made payable in such paper.  All the engagements previously contracted at home, by the United States, were expressed in Spanish dollars ;  all the moneys of account of the several states, were estimated and payable in that coin ;  there might be some uncertainty as to the precise weight of pure silver which it contained ;  and the assays made at the time, may not, for want of proper means, have had all the accuracy of which that process is susceptible.  But they were made in good faith ;  and the Act of Congress of the year 1791, which declared that the dollar of the United States should contain 371¼ grains of pure silver, has irrevocably fixed that quantity as the equivalent of a dollar of account, and as the permanent standard of value, according to which all contracts must be performed.  The relative legal value of gold and foreign coins to that standard, may from time to time be varied, provided that neither shall be so overrated, as to authorize the payment of a debt with an amount in such coin of a less actual value, than that of the silver to which it may be made to correspond.

The provisions of the Constitution were universally considered as affording a complete security against the danger of paper money.  The introduction of the banking system, met with a strenuous opposition on various grounds ;  but it was not apprehended that bank notes, convertible at will into specie, and which no person could be legally compelled to take in payment, would degenerate into pure paper money, no longer paid at sight in specie.  At a later date, although occasional bankruptcies had taken place, and might again be anticipated, there was no apprehension of a general failure of the banks in three-fourths of the states.  Still less was it expected, and it was the catastrophe of the year 1814 which first disclosed not only the insecurity of the American banking system, as then existing, but also, that when a paper currency, driving away, and superseding the use of gold and silver, has insinuated itself through every channel of circulation, and become the only medium of exchange, every individual finds himself, in fact, compelled to receive such currency, even when depreciated more than twenty per cent., in the same manner as if it had been made a legal tender.  The establishment of the Bank of the United States was recommended by the Treasury, and that Institution was incorporated by Congress, for the express and avowed purpose of removing an evil, which the difference in the rate of depreciation, between the paper currencies of the several states, and even those of different places in the same state, had rendered altogether intolerable.  The object in view has been obtained.  The resumption of specie payments, which the state banks had been unwilling or unable to effect, took place immediately after that of the United States had commenced its operations.  And it has, for a number of years, supplied the country with a currency safer, and, it must at least be allowed, more uniform, than that which the state banks could furnish.  The question, whether the charter, which expires in a few years, should be renewed has been brought by the President before Congress, with a suggestion that a national bank, founded upon the credit and revenues of the government, might be advantageously substituted, to that now in existence.  Reports favorable to the continuance of the present bank, have been made by committees of both houses of Congress.  Another report, on the relative value of gold and silver, and intimately connected with the subject of currency, has also been made by the Secretary of the Treasury to the Senate.  Availing ourselves of the information afforded by those documents, and particularly of the arguments adduced in Mr. M’Duffie’s able report, we intend to examine this important question, principally in reference to the currency of the country, considered as the common standard, by which the value of all the other commodities is estimated, and every contract is performed.

Whatever commodity or species of paper may, by law or general consent, be universally received in any country, in exchange of every other commodity, and in payment of all debts, is the circulating medium or currency of such country, or in other words, its common standard of the value of all commodities whatever, and that which regulates the performance of all contracts not specially excepted.  It is therefore of primary importance, that the commodity or substitute, which may be selected for that purpose, should be of a value as permanent as practicable, and the same in every part of the same country ;  and it is also highly desirable, that the same circulating medium should be common to all countries connected by commerce.  Gold and silver are the only substances, which have been, and continue to be, the universal currency of civilized nations.  It is not necessary to enumerate the well-known properties which rendered them best fitted for a general medium of exchange.  They were used, not only as ornaments and objects of luxury, but also for that particular purpose, from the earliest times.  We learn from the most ancient and authentic of records, that Abraham was rich in cattle, in silver, and in gold ;  that he purchased a field for as much money as it is worth, and in payment weighed four hundred shekels of silver, current (money) with the merchant.  And when we see that nations, differing in language, religion, habits, and on almost every subject susceptible of doubt, have, during a period of near four thousand years, agreed in one respect ;  and that gold and silver have, uninterruptedly to this day, continued to be the universal currency of the commercial and civilized world, it may safely be inferred, that they have also been found superior to any other substance in that permanency of value, which is the most necessary attribute of a circulating medium, in its character of the standard, that regulates the payment of debts, and the performance of contracts.

There is not, however, in nature, any perfect or altogether permanent standard of value.  There is not a single commodity, the relative value of which, as compared to that of all other commodities, is not subject to great and permanent changes as well as to temporary fluctuations.  But it will be found, that the nature of the demand for precious metals, the comparative regularity of the supply, and especially their much greater durability and intrinsic value, than those of any other substance otherwise fitted for a circulating medium, restrain the fluctuations to which the relative value is liable, within far narrower limits, than is the case with any other commodity which might have been selected for a currency.

It is well known that the discovery of America was followed by a great and permanent change in the price of the precious metals, which reduced it to one-fourth of their previous relative value as compared to all other commodities.  This great revolution was due to a simultaneous vast increase of the supply and corresponding reduction in the cost of production of the metals.  The American mines of silver do not lie nearer the surface of the earth than those of other countries ;  the ore rarely yields more silver than one-fourth per cent. of its weight ;  nor was there at the time any improvement adopted that tended materially to lessen the expense of extracting the silver from the ore.*  The superiority of the silver mines of America, appears to consist, principally, in the magnitude of the beds, and the much greater quantity of ore which can accordingly be dug out with the same labor.  The annual labor of one miner at the mine of Valenciana, the most fertile of Mexico, was sufficient, in 1803, to extract from the bowels of the earth, four hundred quintals of ore, which produced one quintal of silver ;  and the annual produce of the mine exceeded three millions of dollars in value, (about 220,000 lbs. troy weight) :  whilst, at the richest mine of Saxony, the annual labor of eleven miners was necessary to extract the ore sufficient to produce a quintal of silver ;  and the annual produce was less than ninety thousand dollars, (about 6,200 lbs. troy weight).  Although the money price of mining labor appears to be five times greater in Mexico than Saxony, and notwithstanding the want of fuel and other circumstances which increase the current expenses, the cost of production was still much less at the Mexican than at the Saxon mine, and left a considerable rent to the owner.  The Saxon mine, though probably as rich as any that was in operation in Europe prior to the discovery of America, could not, on account of the difference in the rate of wages, be worked if situated in Mexico.  It follows, that all the American silver mines are superior to it in fertility, though in that respect differing from each other, and gradually decreasing from that of Valenciana, down to the poorest, which probably affords no rent to the owner.

The American mines, or washings of gold, are in the same manner more fertile, or, with the same labor, produce much greater quantities of pure metal than those of Europe.  But the difference must have been less with respect to gold than to silver mines.  The relative value of gold to silver was, before the discovery of America, at the ratio of 11 or 12, and is now at that of 15 or 16 to 1.  If the depreciation in the value of silver has been at the rate of 4 to 1, that of gold has been only at the rate of about 3 to 1 :  and this may afford some reason to think, that, of the two metals, gold is probably the most permanent standard of value.  It must be observed, that, though wanted for similar purposes, the relative value of gold to silver does not depend on any supposed similarity or connexion between the two metals, but is the result of their respective prime cost, which determines the value of each in relation to that of all other commodities.

As the total importation of precious metals from America to Europe had not, prior to the year 1596, exceeded a quantity equal to that contained in eight hundred millions of dollars, and the depreciation was then already at the rate of about 3½ to 1, it is probable that the total amount of gold and silver existing in Europe prior to the discovery of America, though worth then four times as much, did not in quantity exceed that contained in three hundred millions of dollars, money of the present times.

The total amount of gold and silver produced by the mines of America, to the year 1803, inclusively, and remaining there or exported to Europe, has been estimated by Humboldt at about five thousand six hundred millions of dollars ;  and the product of the years 1804-1830, may be estimated at seven hundred and fifty millions.  If to this we add one hundred millions, the nearly ascertained product to this time of the mines of Siberia, about four hundred and fifty millions for the African gold dust, and for the product of the mines of Europe, (which yielded about three millions a year in the beginning of this century,) from the discovery of America to this day, and three hundred millions for the amount existing in Europe prior to the discovery of America, we find a total not widely differing from the fact, of seven thousand two hundred millions of dollars.  It is much more difficult to ascertain the amount which now remains in Europe and America together.  The loss by friction and accidents might be estimated, and researches made respecting the total amount which has been exported to countries beyond the Cape of Good Hope ;  but that which has been actually consumed in gilding, plated ware, and other manufactures of the same character, cannot be correctly ascertained.  From the imperfect data within our reach, it may, we think, be affirmed, that the amount still existing in Europe and America certainly exceeds four thousand, and most probably falls short of five thousand millions of dollars.  Of the medium, or four thousand five hundred millions, which we have assumed, it appears that from 1/3to 2/5 is used as currency, and that the residue consists of plate, jewels, and other manufactured articles.  It is known, that of the gross amount of seven thousand two hundred millions of dollars, about 1800 millions or ¼th of the whole in value, and 1/48th in weight, consisted of gold.  Of the four thousand five hundred millions, the presumed remaining amount in gold and silver, the proportion of gold is probably greater, on account of the exportation to India and China having been exclusively in silver, and of the greater care in preventing every possible waste in an article so valuable as gold.

In order, therefore, to produce a revolution in the price of gold and silver, such as was caused by that event, mines must be discovered, which, in thirty or forty years, should produce, in addition to the supply required by the increasing demand, thirteen or fourteen thousand millions of dollars, or three times the quantity now existing ;  and this increased supply must be accompanied with a corresponding reduction in the cost of production.  It is obvious, that the discovery of one hundred new mines, even superior in magnitude, and equal in other respects to that of Valenciana, would only cause mines of inferior fertility to be abandoned, and could produce no greater effect on the price of silver, than reducing it to the actual cost of production at the mine of Valenciana.  The expense of extracting the silver from ore of a given quality, once brought to the surface of the earth, bears too small a proportion to the whole expense of working a mine, to render it possible that any improvement in that process should cause any great reduction in the price of the metal.  It does not appear that such reduction can be effected, otherwise than, either by the discovery of numerous and large beds of ore, much richer in silver than any yet worked, or by a great reduction in the money price of labor in America.  Judging from analogy, the first event, at least to a sufficient extent, is altogether improbable ;  and the last contingency cannot take place but slowly and gradually.  On the other hand, the diminution in the annual supply for the last twenty years, having been exclusively caused by the convulsions attending the revolutions of the new American states, is but temporary ;  and the successive numerous discoveries of new mines, during the seventeenth and eighteenth centuries, render it highly probable, that, after order and security shall have been restored in those states, a similar progress will take place, and continue, as heretofore, to produce an increasing annual supply, corresponding with the increasing demand.  This demand, also, being always proportionate to the wealth and prosperity of the civilized world, can increase but gradually.  It is, therefore, highly improbable, that any new revolution should again occur, producing effects in any degree similar to those which followed the discovery of America, or that there should be any other permanent alteration in the price of the precious metals, but such slow and gradual changes as cannot substantially affect the due performance of the great mass of ordinary contracts.  Before we examine the temporary fluctuations in price, to which both gold and silver are liable, it is necessary to inquire into the nature of the demand for those metals.

Mines being, like tillable land, private property, and of different fertility, the rent of either, as well as the intrinsic value of their respective produce, are regulated by analogous laws.  But there is an essential difference between the demand for corn and that for the precious metals.  That for corn, or the ordinary article of food, is for an amount in quantity, without much regard to value.  That for gold and silver is for an amount in value and not in quantity.  More food is consumed and may be wasted in plentiful years, than in those of scarcity.  But there is always a certain quantity of corn, or other usual article of food, determined by population, and which must necessarily be supplied at any price, without any other limits than actual deficiency in the supply, or absolute inability to pay the market price ;  and in either case a portion of the suffering population must perish.  In a country requiring annually at least fifty millions bushels, or any other quantity of corn, for the necessary subsistence of its inhabitants, there is a most imperative demand for that amount, or a substitute for it ;  and this must be satisfied, if the amount can be procured at all, and at any price, provided the country can by any means pay for it.  The demand for corn is therefore for a certain quantity regulated by the population, and not for a certain value proportionate to the income, capital, or wealth of the country.

But the demand for gold and silver is, either for plate, jewels, and other manufactured articles, such as plated ware, gilding, &c.;  in which those metals are used, or for currency.  It is evident, that all, or nearly all those objects of demand being, with the exception of currency, articles of luxury, the effective demand for them, including both the wish to possess and the means to pay, must be proportionate to wealth, and therefore for a certain amount in value and not in quantity.  No individual can lay out more than a certain portion of his income or capital in plate and jewels.  If the price of the precious metals is reduced to one fourth of what it previously was, as happened during the latter end of the sixteenth century, he will be able, with the same income, to obtain four times the quantity of plate and gold ornaments which he formerly possessed, because their value remains the same.  But the increased cheapness will in a very inconsiderable degree, if at all, have a tendency to increase the amount in value of gold and silver articles which will be used.  An individual may be induced by such great reduction in the price of silver, to substitute silver spoons or forks to those made of inferior metal ;  but so long as silver spoons or forks are dearer than those of any other metal, he cannot, his income remaining the same, indulge his wish without retrenching his expenses in some other respects, and without depriving himself of some other comforts.  What is true of every individual in every country, is equally so of the aggregate of individuals, or of every country.  The demand for an increased value of plate, jewels, and other articles manufactured, in whole or in part, of gold or silver, with the exception perhaps of a few articles in general use amongst all classes, will everywhere be nearly in proportion to the wealth of each country respectively.  And what is nearly correct, as regards the demand far manufactures of gold and silver, is strictly true as applied to the demand for those metals for currency.

As a silver dollar, or dollar bank note, passing from hand to hand, effects in a given time, a year for instance, a great number of payments, the amount of currency wanted in any country is always much less than the gross amount of payments made in currency within the same time.  The amount thus wanted is that which is necessary and sufficient, for the payment of all such purchases of land, labor and product of labor (embracing every species of commodities and capital) as are paid with currency.  Its value must always, therefore, bear a certain proportion to the aggregate value of the land, labor, and all objects whatever, thus paid for with currency.  That proportion, as well as that which the value of the annual purchases effected with currency may bear to the value of the whole amount of annual exchanges and purchases of the country, whether effected with currency or by any other means, mint vary, and cannot be precisely ascertained.  But, whatever either of these two ratios may be, the average value of the various objects purchased, which are paid for in currency within a given time, a year for instance, will always require a certain proportionate value of currency.  The average value of the objects, thus annually paid for, determines the total average amount in value of currency which is requisite, and in the case before us, the average value of precious metals which is wanted for currency, and for which there is an actual demand for that purpose.

Let it be supposed that the amount of currency wanted in a country, is one-tenth part of the whole amount of the annual payments made there in currency ;  and that the currency consisting exclusively of silver, there are annually in that country one million of bushels of wheat sold and paid for in currency.  It is clear, that if the relative value of silver to wheat be such in such country, that one ounce of silver is the equivalent and common price of a bushel of wheat, one hundred thousand ounces of silver will be necessary and sufficient to effect the payment of all the wheat annually sold and paid for in currency.  If on account of a reduction m the cost of its production, or from any other cause, the value of silver, as compared to that of all other commodities, should be reduced to one-half of what it previously was, the value of wheat, as compared with that of all other commodities, silver excepted, remaining the same as before, two hundred thousand ounces of silver would be necessary to effect the payment of the one million of bushels of wheat sold for currency during the year.  But although the quantity of silver (or nominal amount of currency) wanted, was twice as great as before, the value would remain precisely the same, two hundred thousand having become worth no more than one hundred thousand ounces had previously been.  If, instead of this, the value of silver had undergone no change, and either the quantity of wheat, annually sold and paid for in currency, had increased to two millions of bushels, its price remaining the same, or, the quantity thus sold remaining the same, the value of wheat as compared to all other commodities had doubled, as the two hundred thousand ounces of silver, wanted to effect the payments of the sales of wheat, would actually be worth twice as much as the one hundred thousand ounces had been, the value of currency wanted would be twice as great as theretofore.

What is true of the proportionate value of the currency, wanted to effect the payment of the quantity of wheat annually paid for in currency, to the value of that wheat, is equally true of the proportionate value of the currency, wanted to effect the payment of the whole amount of land, labor, and products of labor, annually paid for in currency, to the aggregate value of all those objects.  Although the proportion may vary, according to the rapidity of the circulation, and to the means used in order to economize the currency, it is always that aggregate value, which determines the value of the currency wanted in any country.  Whilst that aggregate value remains the same, any great variation in the amount in quantity of the currency must be due to a change, or cause a change, in its value, as compared with that of all other commodities.  Where gold and silver are the only currency, any great and permanent increase in the quantity of those metals used as currency, (the aggregate value of the objects annually paid for in currency remaining the same,) must be due to a corresponding reduction in the cost of production of gold and silver ;  which cost, leaving to the owners of mines a greater or less rent according to their fertility, determines the value of those metals as compared with that of all other commodities.  Where a paper has been substituted to a metallic currency, any similar considerable increase in its amount must cause a corresponding depreciation in its value, if the aggregate value of the objects, annually paid for in currency, remains the same.

The amount in value of the currency wanted to effect the necessary payments, though but a comparatively small portion, is one of the most important, productive, and necessary portions of the capital of a nation.  Its use is substituted to an inconvenient barter or exchange of one commodity for another ;  it enables every individual to dispose at all times, and with facility, of the whole surplus of the products of his industry, and to purchase with the proceeds any of the products of the industry of others which he may want ;  it promotes the division of labor, and vivifies the industry of the whole country.  But whenever the precious metals used as currency exceed in any country the value wanted to effect the necessary payments, the surplus becomes a dead and unproductive stock ;  and it will, accordingly, be either converted into manufactured articles of those metals, or be exported to other countries.  If on the contrary the currency should consist of an irredeemable paper, having only an artificial and local value, and none whatever, either in other countries or for any other purpose ;  it is evident that any excess in the nominal value of such currency, beyond the actual value sufficient to make the necessary payments, must cause a corresponding depreciation in that nominal value.  If fifty-five millions of ounces of pure silver, at its present value as compared with all other commodities, are sufficient on an average to effect all the payments made in the United States in currency, the whole quantity of a paper currency substituted to silver, cannot, on an average, whatever its nominal amount may be, exceed in value fifty-five millions of ounces of pure silver, or about seventy-one millions of dollars in our present coin.  Whether such currency amounted nominally to seventy-one, one hundred, or one hundred and forty millions of dollars, its value would not, on an average, exceed that of the seventy-one millions of silver dollars wanted to effect the necessary payments ;  and the paper money would generally depreciate at least in proportion to the excess of its nominal amount beyond seventy-one millions of silver dollars.  Having recurred to numbers by way of illustration, it is proper to observe, that we do not mean to assert that the total value of currency wanted in any country is a fixed sum.  Even when no alteration has taken place in the industry and commerce of a country, the amount of currency may occasionally, to a certain extent, exceed that which is actually wanted, without affecting its price.  An approximation of the average amount, which always fluctuates within certain limits, is all we pretend to give.

It is obvious that the aggregate value of the annual payments made in currency, which regulates the value of the currency wanted, must itself principally depend on the aggregate value of the land, labor, products of labor, and in short of all the objects which are or may be annually sold or exchanged.  The amount of the value of currency wanted, or the demand for currency in every country, depends therefore principally on its wealth, but is modified in some degree by the state of society.  The wages of labor, and the rent of land, are, in most countries no inconsiderable portion of the objects which must be paid for in money.  Countries where slave is generally used instead of free labor, or where, as in the United States, the greater part of the land is occupied and tilled by the owners, or, when rented, let generally on shares, will, therefore, with equal wealth, require a less proportionate amount of currency in value.  Less is also wanted in purely agricultural countries, and everywhere by those engaged in agriculture, than in any other profession.  As a far greater part of the income of almost every individual is expended on articles of food, than on the product of any other one branch of industry, farmers consume a much greater part of the products of their own industry, and they therefore have a less proportionate amount of those products to exchange for the products of the industry of others, than any other profession.  Barter continues also to be a principal mode of exchange in the country, at least in a great portion of the United States, where the planter and farmer obtain from time to time their supplies from the merchant, and pay him annually with their crop.  It may be said, generally, that, with respect to the state of society, the want and demand for currency increase in proportion to the density of the population, the consequent multiplication and growth of towns, and the division of labor.  And these being almost exclusively the result of the increasing growth, prosperity, and wealth of a country, it may be correctly asserted, that the demand for currency in any country is generally proportionate to its wealth.

That demand increases in proportion to that of population, only in as far as population is a principal element of wealth; and both will increase together, nearly in the same proportion, in a country which in other respects is nearly stationary.  But the ratio of the population to the actual amount of currency, which always corresponds nearly with the demand for it, will be found to differ materially in various countries, according to the productiveness of labor, to the accumulated amount of products of labor or capital, and generally to the wealth of each respectively.  The perpetual melting of coins, makes, indeed, the amount of coinage alone, and without many subsidiary investigations, a very imperfect criterion of the amount of gold and silver coins existing in any country.  A much more correct estimate may be made, where paper or debased coin, neither of which can be advantageously exported or used for any other purpose, constitute the whole or greatest part of the currency.  And resorting to both means, an approximation sufficient for the purpose may be obtained.

We learn from Storch, that the paper money of Russia, amounted, in 1812-1814, to five hundred and seventy-seven millions of rubles, and the copper currency to about twenty-five millions.  Both being depreciated to one-fourth part of their nominal value, were equivalent to one hundred and fifty millions of silver rubles ;  to which adding the estimated amount of twenty-five millions of silver rubles still in circulation, gives a total of one hundred and seventy-five millions, equal to less than one hundred and thirty-two millions of dollars.  The paper circulates, almost through the whole empire, from Archangel to Odessa, and from the banks of the Dwina to the confines of Asia.  Excluding Riga, Courland, and the Asiatic provinces, the one hundred and thirty-two millions of dollars are the total value of currency, for at least thirty-five millions of souls, that is to say, at the rate of less than four dollars a head.

It will hereafter be shown, that the amount of currency of the United States, did not, in 1829, probably exceed seventy-three millions of dollars, or at the rate of about six dollars a head ;  a result nearly the same as that of the year 1819.  The reasons, why the amount is less than might have been inferred, from the extensive commerce of the United States, and the wealth of our large cities, have already been briefly indicated.

In France, where great pains have been taken to ascertain the facts, as far as it is practicable, in a country, nine-tenths at least of the currency of which consist of the precious metals, the estimates vary, for different years and different amounts of population, from two thousand to two thousand five hundred millions of francs, but only from seventy-two to eighty francs, or from thirteen and a half to fifteen dollars a head.

The bank notes of the Bank of England, and of country banks, amounted, in the year 1811, to forty-four and a half millions sterling, and those of Scotland to three millions and a half, equivalent, together, to about forty-four millions specie, to which adding about four millions’ worth of debased silver, gives, on a population of about twelve millions of souls, about £4 sterling, or 19 dollars a head.  In 1829, the amount has been stated to be twenty-two millions in gold, eight millions in silver, and twenty-eight millions in English bank notes, to which, adding four millions of Scotch notes, gives sixty-two millions, or about the same result in proportion to the population ;  since this, allowing the same rate of increase since 1821, as between 1811 and 1821, must now amount to between fifteen and sixteen millions of souls.  But, including the population and the bank notes of Ireland, we would have a population of about twenty-three millions, and a currency of about sixty-six millions sterling, or, as in France, about fourteen dollars a head.

From these and more imperfect data, in relation to other countries, we believe that the total amount of currency in Europe and America, may be estimated at two thousand to two thousand three hundred millions of dollars ;  three-fourths of which consist of the precious metals, and the residue of bank notes and irredeemable paper money.

The amount in weight or quantity of gold and silver, is now fifteen times as great in Europe and America, as it was prior to the discovery of the last country.  But the three hundred millions previously existing, were then worth as much as twelve hundred millions at this time.  The increase, so far as it consists only in amount, and has been caused by the reduced cost of production, is, with respect to currency, of no importance whatever.  It is quite immaterial to the community, whether one thousand ounces of silver, will, on an average, purchase one thousand or four thousand given measures or weights of every other commodity.  Had not that reduction taken place, four hundred millions of dollars in currency would have answered the same purpose as is now effected by sixteen hundred millions, without any other difference, than probably the use of coins of base metal, instead of our dimes and half dimes.  But the increase from twelve hundred millions, (the present worth of the former three hundred millions,) to four thousand five hundred millions ;  is an increase in value, and indicates a corresponding, and, on account of the numerous substitutes for currency introduced by commerce and credit, a still greater proportionate increase of the wealth and prosperity of Europe and America together, during the two last centuries.  That increase of value has no otherwise contributed to this increased wealth, than as far as it has added to the amount of exchangeable commodities ;  and the same effect would have been produced by a similar increase in any other commodity.  The increased wealth and prosperity of Europe and America are the cause, and not the effect, of the increased amount in value of gold and silver, which they now possess.  The causes of that great increase of wealth, are not to be found in the fertility of the mines of America, but in the general progress of knowledge, skill, and every species of industry, in the consequent improvement of governments, laws, and habits, in all that constitutes what is called civilization.  The influx of precious metals follows in every country, and does not precede the corresponding increase of wealth.

As the regularity of the annual supply of the precious metals is not affected by the seasons, the changes in the amount of that supply, had, during the two last centuries, been gradual, and hardly sensible from year to year.  That, which has taken place within the last twenty years, has been greater than had been experienced, since the first great revolution caused by the discovery of America.  The annual supply of the mines of America, Asia, and Europe, had reached its highest point, in the years 1803-1810, and amounted then to fifty millions of dollars, or to about one and one-fourth per cent.  Of the whole quantity of precious metals then existing in Europe and America.  The convulsions of the former Spanish colonies have, for the last twenty years, reduced the total annual supply to about twenty-seven millions, or to about three-fifths per cent. of the whole amount now existing.  A diminution of one-half of the ordinary supply of any other commodity, the demand remaining the same, would have produced a still greater proportionate increase in its price.  Continued during twenty years, this diminished supply of the precious metals, whilst the demand is still gradually increasing, cannot but have affected, in some degree, their price ;  and if prolonged much longer, the effect would be visible ;  but it has been gradual, from year to year imperceptible, and affecting in no sensible manner the performance of contracts.  This is obviously due to the comparative small amount of the ordinary supply, which does not exceed one hundredth part of the stock on hand, whilst the annual supply of corn and of most other natural products always exceeds, and that of most manufactured articles often equals, the amount of the old stock.  The superior durability and value of the precious metals, over every other substance (including even iron, copper, and other metals) fitted for a circulating medium, which produce and preserve the great accumulation of gold and silver, are the principal cause of their great superiority over every other commodity, as a permanent standard of value.

For the same reasons, any accidental inequality in the distribution of the precious metals, amongst the several countries, in proportion to their respective wants, is promptly and easily repaired ;  and any extraordinary demand from a particular country met without difficulty, or sensibly affecting the price of the metal required.  The general supply of stock on hand, is always sufficient to meet such demand, and the expenses and charges of transportation are, on account of the greater value of an equal bulk, far less than those of any other commodity, hardly ever exceeding in time of peace one per cent. on the value, even when brought from the most distant countries of the civilized world.  During the four years which immediately followed the resumption of specie payments in England, that occurrence caused an extraordinary demand of more than twenty millions sterling in gold, or about twenty-four millions of dollars a year, being near three times as much as the annual supply of that metal ;  and this demand was met without any difficulty, or sensibly enhancing the price of gold.  As the gold coins of France are, by the mint regulations of that country, a little overrated in relation to those of silver, they always command a small premium, varying generally from one-fifth to one-half per cent.  This premium never exceeded the last rate during the years of that demand ;  which is a conclusive proof that it could not at most, and at any time, have enhanced the price of gold more than three-tenths per cent.;  since, in that case, the advance would have also taken place in France, whence, in fact, a considerable portion of that demand was supplied.  This decisive fact also shows, that it is erroneously that the exportation of American gold coins, which commenced in the year 1821, has been ascribed to that extra ordinary demand.  The exportation has been continued uninterruptedly, after that cause had ceased to operate, and, as will be seen hereafter, is due to the alteration from that epoch in the rate of exchanges.

But it is nevertheless true, that as the value of the various objects exchanged or sold annually in a country, and, what is still more important, as the proportion of that value to the amount of the actual payments which must be made in currency, are both subject to variations, the amount of currency wanted in a country does, exclusively of the gradually increasing demand caused by an increasing prosperity, vary at different times in the same country.  That amount ought, therefore, in prosperous seasons, to exceed that which is then necessarily wanted, in order to be able to meet the greater demand which at times takes place.  There are, in every country, banks, bankers, and great dealers, in whose hands the currency of the country accumulates, to be thence again distributed amongst the members of the community, according to their respective wants.  Obliged to meet those demands, it is their interest and duty to keep always those reservoirs sufficiently full.  In countries where no artificial substitute has rendered the task more difficult, and where specie is the sole or principal currency, although there may be occasional varieties in its value, they are of rare occurrence and restrained within narrow limits ;  and an actual want of specie is hardly ever known.

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[lord edward coke]

Albert Gallatin
Currency and Banking System
1831



The substitution of a paper currency to the precious metals, does not appear to be attended with any other substantial advantage than its cheapness ;  and the actual benefit may be calculated with tolerable accuracy.  If in a country which wants and does possess a metallic currency of seventy millions of dollars, a paper currency to the same amount should be substituted, the seventy millions in gold and silver, being no longer wanted for that purpose, will be exported, and the returns may be converted into a productive capital, and add an equal amount to the wealth of the country.  If the banking system, founded on the principle of a paper currency convertible at will into specie, should be adopted, and notes of a very low denomination be excluded, it will be found, that the circulation would consist of about sixty millions in bank notes and ten millions in silver.1  But in that case the banks, in order to sustain specie payments, must, on an average, have in their vaults about twenty millions in specie.  This is believed to be nearly the state of things at this time in the United States, if, according to common usage, we consider bank notes as constituting the whole of the paper currency.  There have been, therefore, on that principle, only forty millions of dollars saved and added to the productive capital of the country.  This, at the rate of 5 per cent.  a-year, may be considered as equal to an additional annual national profit of two millions of dollars.  The substitution of bank notes to a metallic currency produces the same effect, as an addition of two millions a-year, to the exports of the United States, or as a diminution of taxes to the same amount.  Being inclined to think that the credits on the books of the banks, called deposits in the United States, constitute to all intents and purposes a part of their currency, we believe that the benefit derived from the banking system is still greater, and is tantamount to an annual national saving, or additional profit, of near five millions of dollars.2  This is certainly an important advantage, provided the system is conducted so as to afford complete security ;  and it would be altogether free of objection, if the banks were only banks of deposit and issued no paper.  Barns are certainly a very expensive implement of agriculture.  The capital expended on those buildings, in the middle and northern states, is more than the value of one year’s crop of the farms, and causes therefore a deduction of more than 5 per cent. on the annual gross produce of the earth.  To dispense with barns would be a greater annual saving, than that which arises from the substitution of a paper to a metallic currency.  Some favorable seasons occur, when the farmer might thresh his wheat on a temporary floor exposed to the weather, and dispense with a barn.  Yet, in our climate, every prudent farmer prefers security to a precarious advantage, and would consider it a most wretched economy, not to incur the expense necessary for that object.  Similar is the economy of that expensive instrument, the precious metals, if the substituted paper currency is insecure.  To unite that security, which is derived from a uniform and permanent standard of value, with the acknowledged and considerable saving arising from the substitution, is the difficult problem to be solved, in every country that resorts to that cheaper species of circulating medium.

A paper currency is either convertible at will into specie, or redeemable at some future time, or altogether irredeemable.  The two last descriptions are excluded by the Constitution of the United States, and require examination, only because experience has shown, that a currency of the first description may degenerate into one not convertible into specie, without, on that account, ceasing to be the only currency of the country.  Some persons are yet found who contend for issues of paper money to an indefinite amount, without regard to the fundamental principle, that the demand is for value, and that it is impossible to increase the amount of currency beyond certain limits, without producing a corresponding depreciation in its value.  A recurrence to that principle is sufficient to dissipate the singular illusion under which that opinion is advanced.

We find, in a paper laid before the Senate during their last session, that, according to the increase of population since the year 1820, there ought to have been, since that time, a demand for thirty-two millions of acres of the public lands, which, at the present price of 1¼ dollars per acre, would have yielded forty millions of dollars, (or four millions a-year,) whilst the annual sales amount only to one million, “ the reason for which is want of money to purchase.”  The remedy proposed in the sequel, is an issue of paper money by government, the general benefit of which, according to the writer, would be stupendous.  “Were our own government to increase our circulating medium only fifty millions of dollars, income-yielding property would rise two thousand millions of dollars.”

The word “money” is used as synonymous with specie and currency.  But as currency is the thing by which every thing else is valued, the value of every species of property is expressed in currency.  A planter, possessed of property, which, in usual times, might be sold for one hundred thousand dollars, is accordingly said to be worth one hundred thousand dollars, though he may not, at any one time, have in his possession one thousand dollars in currency.  The word money comes thus to be used as synonymous with wealth ;  and, in that sense of the word, we agree with the respectable writer of the paper in question, that the reason why the sales of the public lands have not far exceeded one million of dollars a-year, has been the want of money, that is to say, of wealth on the part of those who would have wished to purchase.  From the other writings of the same author, we had concluded, that he was in favor of issues of paper money almost to an indefinite amount.  But it appears by this paper, that he is perfectly aware, that a very limited amount of currency is sufficient ;  since he avers that an additional issue of fifty millions would produce, on the value of the productive property of the country, an effect forty times as great as that issue.  This reduces the question to one of quantity, and whether the amount of currency supplied by the banking system now existing is insufficient, and ought to be increased by an issue of government paper.  As it is the interest of the banks to issue as many notes as can be kept in circulation, and as they are authorized by their charters to issue more than three times the present amount, it is clear that the obligation to pay their notes in specie on demand is the sole reason why that amount is not greater.  It is, therefore, absolutely necessary, in order to enlarge it, that the proposed new issue should consist of a government paper money, not convertible into specie on demand.  It could not, according to the Constitution, be made a legal tender for the payment of debts between individuals, and might only be made receivable in payment of debts due to the United States.  It is evident that such paper could not circulate a single day in competition with that of the banks, which is received not only for that purpose, but in payment of all debts, and is at all times convertible into specie.  The new paper would be immediately depreciated in proportion to its amount, and produce no other effect than that of lessening the revenue of the United States in the same proportion.  It would be much more simple, if that was the object, to reduce the rate of existing taxes ;  with respect to the public lands, to reduce the price at which they are now sold.  We believe that this last measure would be equally just and consistent with sound policy, and that the great change of circumstances which has taken place, and principally the superabundant supply of public lands, compared with the effective demand at the present price, imperatively require a reduction of that price.  Those lands are the property of the people of the United States at large, and cannot be given gratuitously either to particular individuals or to particular states.  But they should not be kept out of market by persevering in a price, that was adapted to the time when it was fixed, and no longer accords, either with the greatness of the supply, or with the wealth of the natural purchasers, of those who want them for their own use, and who may, if the expression is admissible, be considered as the consumers of that commodity.

But supposing, for the sake of argument, that this additional issue of paper by government should not experience any depreciation, and should circulate at the same rate, as bank notes convertible on demand into specie, not the slightest advantage would accrue to the purchaser of public lands, or to any other individual.  If not depreciated, the same quantity of labor, of wheat, or of any other commodity, will be necessary, and must he given, in order to obtain an equal quantity either of that paper, of bank notes, or of specie.  If depreciated and circulating, the farmer might indeed obtain two dollars of that paper, instead of one in specie, for a bushel of wheat, and the laborer receive one dollar nominal, instead of half a dollar in specie, for a day’s labor.  But what benefit would arise to either ?  Since the farmer would be obliged to pay also a double nominal price for the labor he wanted, and the laborer a similar double price for the farmer’s wheat, and since both would likewise be obliged to give a double price for any article they might want, when paid with that paper.  This is so simple and obvious, that we are entirely unable to understand on what grounds the contrary doctrine can be sustained.  After having tried to discover what was meant by those who pretend to argue in support of excessive issues of paper money, we have found nothing but a repetition of the erroneous assertions, on which the famous Law attempted to build the stupendous scheme which bears his name and desolated France in the year 1720.  He asserted, 1st, that gold and silver were only the representative or sign of wealth ;  2d, that paper might be that sign as well as the precious metals ;  3d, that by doubling or trebling the amount of that sign, the national wealth would be increased to that amount ;  4th, that such increase of the currency would reduce the rate of interest, and thereby promote industry.  It is hardly necessary to show that those assertions are a series of errors.  The precious metals are not merely the sign or representative of wealth ;  they have an intrinsic value, on account of the cost of their production, and of the demand for other uses than currency, and are therefore wealth itself.  It is because they have as intrinsic and comparatively stable value, that they have become the standard of the value of every other commodity, or, according to Law’s vocabulary, the representative or sign of wealth.  A certain quantity of those signs is necessary for a circulating medium ;  but the quantity used adds nothing more to the wealth of any country, than the intrinsic value of that quantity.  Paper having no intrinsic value, never can, whatever its amount may be, add any thing directly to the national wealth.  Its utility consists in the substitution of a sign of no value for a sign which has an intrinsic value, and which may, on that account, be used advantageously for other purposes than that of a sign.  Having performed that office, the increase of paper, beyond the amount of the valuable sign of which it takes the place, neither adds nor produces any wealth.  The multiplication of the signs, beyond the amount in value wanted, can have no other effect than that of depreciating their nominal value, and has none on the rate of interest, which depends, not on the amount of those signs, or of currency, but on the proportion between the amount or supply of capital which may be loaned, and the demand for that capital.  The result of Law’s scheme was a fatal illustration of his doctrines.  By a series of arbitrary acts on the part of government, and by connecting some splendid and illusory schemes with the bank, he succeeded in putting in circulation about four hundred and twenty millions of dollars in bank notes, or more than twice the amount of the currency then wanted in France.  This paper was made a legal tender, to the total exclusion of the precious metals.  But the laws, and all the power of the French government, were unequal to the task of sustaining that excess of currency.  The price of every species of merchandise naturally rose 100 per cent.  Government, with a view probably to prevent a total catastrophe, reduced by a decree the notes to one half of their nominal value.  The bubble burst instantaneously.  The whole currency of the country, the four hundred and fifty millions dollars of bank notes, could not, the next day, have been sold for the value of the paper on which they were printed.  They were subsequently funded at the rate of eighty for one.  The public creditors, who had been paid in notes, lost one hundred and fifty millions of their capital.  Some speculators in shares were enriched ;  all the actual stockholders were ruined ;  and the calamity extended to all the industrious and productive part of the community.  Since that time banks have not been connected with such gross commercial bubbles.  But in England, the South Sea scheme, and the joint stock companies of the year 1825, were erected on the model of the Mississippi Company of Law ;  and the Assignats of the French revolution, as well as all the other attempts to substitute an excessive issue of pure paper money to a metallic currency, have been but copies of his bank notes.

It has been contended by distinguished writers of a very different description, that an irredeemable paper currency, not exceeding in its nominal amount that in value which is actually wanted, might be altogether substituted to gold and silver, provided that government should always regulate the issues so as never to exceed or fall short of that amount.  The advantage of such paper, over notes convertible on demand in specie, would consist in saving the expense of the gold and silver necessary to pay such notes at the will of the holders, and in protecting the currency against both a panic, and the consequences of any great drain of the precious metals from abroad ;  dangers to both of which notes payable in specie are exposed.  It must, in the first place, be observed, that the unavoidable effect of an increased or diminished value of the currency, arising from contraction or excess of its amount beyond certain limits, is ultimately to sink or to raise the price of every other commodity.  But this change may not affect immediately the price of the commodities or of the labor applied to objects not susceptible of being exported ;  and that of exportable commodities is often affected by variations in the relative amount of supply and demand, which are altogether foreign to the state of the currency.  The wisest government, with the purest views, never has any other means of ascertaining, whether the amount of a paper money is too limited or excessive, than the price of the precious metals in such paper, because those metals are, of all others, the commodity least liable to variations in its value.  The rate of exchanges may occasionally be a more sensitive test, but is in reality a more circuitous and less certain mode of resorting to the same standard of value.  Thus government has no means to ascertain, whether its issues are too contracted or too large, till after the evil has actually taken place ;  whilst banks, obliged to pay their notes in specie, and skilfully directed, are constantly employed in preventing its occurrence.  But supposing government to be endowed with such skill as to be able always to adjust the proper amount of currency ;  an amount which, if this is metallic, adjusts itself, and which, by banks properly conducted, may be tolerably well regulated ;  there is still an ingredient, inherent to paper not convertible on demand in specie, which no human skill can control.  This is public opinion, with respect to future contingencies, and therefore purely conjectural.

It has been asserted, that the value of an irredeemable paper money is altogether regulated by its amount, and does not, or at least ought not, to depend on confidence in the solvency of the government by which it is issued.  The last assertion may be strictly true, though we believe, that in point of fact, there has hardly been any issue of paper, which in its origin was not founded on an explicit or implied promise to redeem it.  But, if not depending on confidence in the solvency, the value of the paper will most certainly be affected by the public confidence in the skill, discretion, and probity of government, these being the only guarantees against excessive issues, and experience having but too well proved the natural disposition of every government which ever did issue paper, to resort, whenever pressed by its exigencies, to that resource, without regard to amount and consequences.  Our principal concern, however, is with paper, originally convertible on demand in specie, and which has degenerated into a paper, the redemption of which is in definitely postponed.  It is evident that the value of such currency must depend, at least in part, on the probability of its being ever redeemed, or of specie payments being resumed, and of the time when this will take place.  And as there lies the danger to which the currency of the United States is exposed, we will illustrate that position by some instances.

The paper money issued by Congress during the war of the American independence, experienced no sensible depreciation before the year 1776, and so long as the amount did not exceed nine millions of dollars.  A paper currency, equal in value to that sum in gold or silver, could therefore be sustained so long as confidence was preserved.  The issues were gradually increased during the ensuing years, and in April 1778, amounted to thirty millions.  A depreciation was the natural consequence ;  but had the value of the paper depended solely on its amount, the whole quantity in circulation would have still been equal in value to nine millions, and the depreciation should not have been more than 3 to 1 ;  instead of which, it was then at the rate of six dollars in paper for one silver dollar, and the whole amount of the paper in circulation was worth only five millions in silver.  It is obvious that the difference was due to lessened confidence.  The capture of Burgoyne’s army was followed by the alliance with France and her becoming a party to the war against England.  The result of the war was no longer considered as doubtful, and sanguine expectations were formed of its speedy termination.  The paper accordingly rose in value ;  and in June, 1778, although the issues had been increased to more than forty-five millions, the depreciation was at the rate of only four to one.  From the end of April of that year, to the month of February, 1779, although the issues had been increased from thirty-five to one hundred and fifteen millions, the average value in silver of the whole amount of paper in circulation exceeded ten millions, and it was at one time nearly thirteen millions, or considerably more than that which could be sustained at the outset of the hostilities.  But when it was discovered, that the war would be of longer continuance, confidence in the redemption of a paper money, daily increasing in amount, was again suddenly lessened.  The depreciation increased from the rate of 6 to that of 30 to 1 in nine months.  The average value in silver of the whole amount of paper in circulation from April to September 1779, was about six millions, and it sunk below five during the end of the year.  The total amount of the paper was at that time two hundred millions ;  and although no further issues took place, and a portion was absorbed by the loan offices and by taxes, the depreciation still increased, and was at the end of the year 1780 at the rate of 80 dollars in paper for 1 in silver.  The value in silver of the paper currency, was then less than two millions and a half of dollars ;  and when Congress, in March following, acknowledged the depreciation, and offered to exchange the old for new paper at the rate of 40 for one, the old sunk in one day to nothing, and the new shared the same fate.

The aggregate of bank notes of the Bank of England and country banks was nearly the same in the years 1810, 1813, and 1818, being, for each of those years respectively, about forty-six millions, forty-six millions two hundred thousand, and forty-six millions seven hundred thousand pounds sterling ;  and the value in gold of the aggregate amount of notes was, for each of those years respectively, forty, thirty-five and a half, and forty-five and a half millions.  A result nearly similar, will be found by comparing periods of years.  The average amount of the notes in circulation was about forty-six millions for the years 1810, 1811 ;  forty-five millions two hundred thousand for the years 1812 to 1816 ;  and forty-four millions four hundred thousand for the years 1817 to 1819 ;  and the average value in gold of those notes, for each of those periods respectively, was forty-one, thirty-six, and forty-three millions.  It is obvious that those differences, in the respective value in gold of the whole amount of the currency, did not depend on its amount, but on the opinion entertained, either of the probable increase or contraction of the notes, or of the resumption of the specie payments.  Had the depreciation of the notes depended solely on their excess, it would have been nearly the same in the years 1810, 1813, and 1818, when that amount was nearly the same.  Reducing into gold the value of the whole currency, no other reason can be assigned but a greater or less degree of confidence, why a paper currency worth forty-five and a half millions could be sustained in 1818, whilst no greater value than thirty-five and a half millions circulated in 1813.  It is indeed evident, that the confidence in the resumption of specie payments must have been greater in 1810, and much greater in 1818, than in 1813 ;  and that, independent of the intrinsic value of the bank notes, as regulated by their amount, they must, whenever depreciated, acquire some additional value, according to the opinion entertained of their being again converted into specie, and of the proximity of that event.

A still more striking instance of the sudden alterations in value, to which notes not convertible into specie are liable, is to be found in that which took place in England, in the spring of 1815, on the landing of Bonaparte from the Island of Elba.  The bank notes had gradually risen in value since the peace, and were not depreciated more than 12½ per cent. in the beginning of March.  Towards the end of that month, and within less than a fortnight, the depreciation was 25 per cent., although there had been, during that time, neither additional issues of paper, nor exportation of the precious metals.  We will quote only one more instance of a similar nature.  During the general suspension of specie payments in the United States, the depreciation of the bank notes varied in the several sea-ports.  Those of the Baltimore banks were at 20 per cent. discount in January 1815.  The Treaty of Peace was ratified and published in the month of February ;  and as the suspension of specie payments had not lasted six months, and was caused by the war, a general expectation immediately prevailed, that those payments would be forthwith resumed.  Accordingly, bank notes rose everywhere in value, and, in March, the discount on those of Baltimore was only 5 per cent.  As that expectation was disappointed, the notes again sunk in value, and, in July, those of Baltimore were again at a discount of 20 per cent.  It is believed, that no doubt can remain, that a paper currency liable to fluctuations like those, and originating in causes that baffle all calculation, never can, by any skill whatever, be made a stable standard of value.

The paper currency of the United States is of a very different character, and, according to the general acceptation of that term, consists almost exclusively of bank notes payable on demand in specie.  It may however be questioned, whether there are not other species of paper founded on credit, which ought to be considered as making part of the currency, and not merely as substitutes.

There are in England, where incorporated country banks, issuing paper, are as numerous, and have been attended with the same advantages and the same evils as our country banks, some extensive districts, highly industrious and prosperous, where no such bank does exist, and where that want is supplied by bills of exchange drawn on London.  This is the case in Lancashire, which includes Liverpool and Manchester, and where such bills, drawn at ninety days after date, are indorsed by each successive holder, and circulate through numerous persons before they reach their ultimate destination, and are paid by the drawee.  It has been contended that these substitutes for currency, and in one respect performing its office, must be considered as forming part of it ;  and this assertion has been carried so far, as to insist that there was in England a circulation of one hundred and fifty millions of dollars in bills of exchange, which was of the same character.  As this view of the subject would materially affect the result of any inquiry respecting currency, the question must be examined, and extended to private notes and to bank deposits.

It is difficult to distinguish a note on demand drawn by a private individual from a bank note, in countries where every individual is left at liberty to throw such notes in circulation as part of the currency.  The discrimination has always been made on the Continent of Europe, where it is not believed that any paper of that description has ever been permitted to be issued by any person or company not specially authorized to that effect.  We are not aware that any similar general restriction exists in Great Britain, or that others are to be found there, than the clause, in favor of the Bank of England, which forbids banking associations to consist of more than a limited number of partners, and the late laws forbidding, except in Scotland, the issue of notes under five pounds.  The same liberty seems to have originally existed in the United States, but has subsequently been restrained by their several laws to incorporated banks.  A solitary exception is to be found in Mr. Stephen Girard’s Bank, which was previously established, and which, from his great wealth, skilful caution, and personal character, is justly entitled to as much credit as any chartered bank in the United States.  Congress has not, however, passed any law preventing the issue of notes by the corporation of the city of Washington, and there is still a small amount of paper in circulation, issued by the state of North Carolina.  In every other respect, the currency of the United States, so far as it consists of notes, is strictly confined to bank notes issued by chartered companies.

A bill of exchange, drawn by an individual or individuals, who do not issue notes having the character of currency, appears to us to be clearly distinguishable from a bank note, though it is a substitute, and lessens the amount of currency which would otherwise be required.  A payment made in bank notes is a discharge of the debt, the creditor having no further recourse against the person from whom he has received the notes, unless the bank had previously failed.  The bill of exchange does not discharge the debt, the person who receives it having his recourse against the drawer and every preceding indorser, in case the drawee should fail or refuse to pay.  But the essential distinction is, that the bills of exchange are only a promise to pay in currency, and that the failure of the drawers, drawers, and indorsers does not, in the slightest degree, affect the value of the currency itself, or impair that permanent standard of value by which the performance of all contracts is regulated.  The case is, however, quite different, when the bills are drawn by a bank authorized to issue bank notes which make part of the currency.  We perceive no difference between such drafts, particularly when paid at sight, and either post notes or ordinary notes.  Five dollar drafts, drawn by the branches of the Bank of the United States on the bank, circulate at this moment in common with the usual five dollar notes.  Similar drafts, varying in amount to suit the convenience of purchasers, are daily drawn by the bank on its offices, and by those offices on each other, or on the bank.  Many of those drafts pass through several hands, and circulate several months, in distant parts of the country, before they are presented for payment.  The holders of those bills have the same recourse against the bank, as the holders of bank notes.  Those bills are of the same character, depend on the same security, and in case of failure would share the same fate with bank notes.  Though not usually included in the amount of the circulation of the bank, we cannot but consider the average amount in actual circulation, as making part of the currency of the country.  A question somewhat more difficult arises with respect to credits in account current on the books of the banks, commonly designated in the United States by the name of “ deposits,” and which may perhaps be more easily solved by reducing it to its most simple form, that is to say, by first considering banks purely of deposit.

That of Hamburg, which still exists, is the most perfect of the kind.  It neither issues bank notes, nor discounts notes or bills of exchange, but only receives silver in bars on deposit.  For every bar containing a certain weight, called “ marc of Cologn,” (equivalent to 3,608 grains troy weight,) of silver of a certain standard,3 the bank gives a credit on its books of 442 lubs Bco (27 marcs 10 lubs Bco) money of account.  Any person having a credit on the books of the bank, may be paid in similar bars at the rate of 444 lubs Bco for a marc weight of Cologn of silver of the same standard.  The difference, which is less than one-half per cent., defrays the expenses of the establishment.  All the large payments are effected in Hamburg by checks on the bank, and by a corresponding transfer of the credit on its books from one individual to another.  The utility of the establishment consists not only in the greater convenience and rapidity with which the payments are effected, but also in having substituted silver of an uniform standard, to a currency which consisted of German coins, varying in standard, weight, and denomination.  The aggregate amount of credits on the books of the bank, being at all times precisely equal, at the rate above mentioned, to the quantity of silver in its vaults, it would be incomprehensible, and, indeed, absurd, to suppose, that such large capital, having an intrinsic value, should voluntarily be buried in the vaults, unless its representative, or the credits on the books of the bank, performed every office of currency.  It is undeniable that this is the fact in every respect, every payment being effected by transfers of those credits, and their convertibility at any time into a determined weight of pure silver, affording the best possible standard of value.  This indeed regulates exclusively the value of all the coins, whether in circulation for small payments, or brought to market as bullion.

Let it be supposed now, that it had been found from long experience, that the quantity of silver in the vaults, through all its fluctuations, had never been less than a certain sum, equivalent, for instance, to two millions of dollars.  The directors of the establishment might conclude that this amount would, under no circumstances whatever, be withdrawn, or in other words, that this sum was the minimum of the currency wanted to effect the payments made in bank.  They might therefore think themselves justifiable, in withdrawing that dormant capital from the vaults, and converting it into an active capital, by lending it to individuals.  In this case, the amount of credits on the books of the bank would remain the same, as if that sum in silver had not been withdrawn from its vaults ;  and all the payments effected by the transfers of those credits would continue to be made precisely as theretofore.  The amount of those credits would therefore continue to be, in every respect, the currency of Hamburg, differing from what it was formerly, only in being sustained by a less amount in specie, and in depending, for its ultimate security, on the solidity of those to whom the silver withdrawn from the vaults had been loaned.

What we have stated as a supposititious case, actually took place in the Bank of Amsterdam, constituted on nearly the same principles as that of Hamburg ;  and from which the directors secretly withdrew more than four millions of dollars, which they lent principally to the Province of Holland and to the City of Amsterdam.  And it is, as is well known, what is always done openly and in perfect good faith by all our banks, as well as by the Bank of England and by that of France.  The credits in account current or “deposits” of our banks are also, in their origin and effect, perfectly assimilated to bank notes.  Any person depositing money in the bank, or having any demand whatever upon it, may at his option be paid in notes, or have the amount entered to his credit on the books of the bank.  The bank notes and the deposits rest precisely on the same basis ;  for immediate payment on the amount of specie in the vaults ;  for ultimate security on the solidity of the debtors of the bank.  In case of a run upon a bank, or of its failure, the security of the holders of notes is lessened in proportion to the amount of deposits due by the bank.  We can in no respect whatever perceive the slightest difference between the two :  and we cannot therefore but consider the aggregate amount of credits payable on demand, standing on the books of the several banks, as being part of the currency of the United States.  This, it appears to us, embraces not only bank notes, but all demands upon banks payable at sight, and including their drafts and acceptances.  But in order that such deposits, bills of exchange, or other paper founded on credit, should make part of the currency, it seems necessary, that they should constitute a demand upon banks that do issue currency, or that, as at Hamburg, a transfer of credit on the books of the bank should be a legal tender.  If, in comparing the amount of currency in different countries, we have only included specie and actual issues of paper, it was partly in conformity with received usage, and partly from want of information respecting the amount, in other countries, of the bank credits, which may be considered as perfectly similar to our deposits.

Credit is essential to commerce :  but whenever it receives a shock, a commercial revulsion and distress must necessarily ensue.  This will always affect the currency to a certain extent, since there must be a greater demand for it, in proportion as the resources arising from credit are impaired.  But where, as in the United States, the currency itself rests on credit, and the same institutions which issue that currency are those from which accommodations are expected, want of credit is most liable to be mistaken for a want of currency.

Although the causes of such distress, and of a real or presumed scarcity of currency, are of the same nature, they may, as somewhat dissimilar in their immediate effects, be distinguished as external or internal.  As the imports and exports of a country are now but rarely effected by the same persons, there are always, in consequence of the commercial intercourse between two countries, creditors and debtors on both sides.  It is obviously the interest of both to exchange or sell those debts, when the exporter does not want to import, nor the importer to export merchandise.  A bill of exchange, drawn from the United States on England, is an obligation on the part of the drawer to exchange, for a sum paid to him in the United States, an equivalent in England.  When the credits and debits respectively payable at the same time are nearly equal, the exchange is made on equal terms.  In proportion as the debt of the United States to England is greater than that of England to the United States, the demand for bills on England will become greater than the supply ;  and the drawer will obtain a greater sum in the United States, than that which by his bill he obliges himself to pay in England.  Whenever the difference becomes so great, as to exceed the expense and risk of transporting precious metals to England, those metals will be exported in preference to a remittance in bills.  When the commercial transactions between two countries are comparatively small, and the stock of gold and silver large, their exportation, particularly in neighboring countries, soon pays the balance and restores the equilibrium.  When, as between the United States and England, the respective imports and exports are very large, the balance due may be increased in proportion ;  and as the stock of the precious metals in the United States is comparatively small, the exchange may remain for years unfavorable, and the precious metals continue to be exported, until the balance is actually paid from the proceeds of the exports generally, or converted, by the sale of American stock, into a debt not immediately demandable.  This apparently continued drain was considered, in former times, as an evil of great magnitude ;  and severe laws were, in most countries, enacted against the exportation of specie.  Experience has shown, not only that those laws were inefficient, but also that the best, if not only means, to insure a uniform and sufficient supply of any foreign product, when there is no other object in view, is to lay no restraint whatever on its importation and exportation.  Commerce, when not interrupted by war, or other causes, is always found to supply the amount of precious metals which may be wanted.  Numerous striking proofs might be adduced :  it is sufficient to recollect, that the average rate of exchange on England, from the beginning of 1821 to the end of 1829, has been $4 87 cents per pound sterling, (about 93/5, per cent. premium on nominal par,) or 23/5 per cent. above the true par ;  that it never was, during the whole of that time, below $4 60, at which rate, gold being underrated by our mint regulations, commences to be exported, and that that period was in no degree remarkable for scarcity of specie.

Being obliged to refer to the rate of exchange, it must be recollected, that what is universally meant by par, is the promise to pay, in another place, a quantity of pure silver or gold, equal in weight to the quantity of pure silver or gold contained in the coins, with which the drawer of the bill of exchange is paid.  When bills are drawn at long dates, and payable at a distant place, the time which elapses between the purchase of the bill from the drawer, and its payment by the drawee, must be taken into consideration, in order to calculate what would be an equal exchange, as distinguished from the par of exchange.  There is no other difficulty, but that of ascertaining their respective weights, in order to calculate the par of exchange between countries having the same standard of value, or in which payments are usually made with the same metal.  This being the case in the United States and in France, and the French kilogramme being equivalent to about 15,435 grains, troy weight, the par of exchange of the United States on France, is at the rate of about 5 francs and 34½ centimes for a dollar, since the French franc contains 4½ grammes, and the United States’ dollar 371¼ grains of pure silver.  Allowing 1¼ per cent. on account of the 90 days which will usually elapse between the day on which the value of a bill payable 60 days after sight is, in our country, paid to the drawer, and the day on which that bill is paid in the other country by the drawee, it will be found that the equal exchange between the United States and France is, on such bills, at the rate of francs 5,41 if drawn from the United States on France, and at the rate of francs 5,28 for one dollar, if drawn from France on the United States.

But if one of the two metals is, by mint regulations, underrated or excluded in one country, whilst the other metal is in the same manner excluded in another country, the usual payments will be made in different metals in those two countries ;  and the par of exchange between them must, then, as is the case between the United States and England, depend on the relative value of gold and silver at the time, and vary with every fluctuation of that relative value.  These fluctuations are, however, confined within narrow limits ;  and the medium par of exchange between the United States and England, deduced from the average premium on gold over silver coins in France, is about $4 75, for one pound sterling, or near 7 per cent. above the nominal par assumed in the usual quotations of exchange.  It is in those quotations supposed, that one pound sterling is equal to $4 44 4-9, or, in other words, that one dollar is equal to 4s. 6d. sterling.  It is not necessary to investigate, whether this presumed equality or par was derived from the intrinsic value of some ancient Spanish dollar, no longer current, or whether it was adopted as convenient for the conversion of most of the currencies of the British colonies into British currency.  It is certain that this imaginary par does not even correspond with that which, though erroneously, might be deduced from comparing separately the gold and silver coins of the two countries with each other respectively ;  since this would be, if comparing gold to gold, about $4 56, and if comparing silver to silver, (at the former rate of 62 shillings sterling for one pound troy weight of silver, old British standard;) about $4 63 for a pound sterling.  The dealers in exchange are at no loss to make their calculations, whatever rate may be assumed as par in the usual quotations :  but this puzzles, and, in various respects, misleads those who, without investigation, naturally suppose that what has been assumed as such is the true par of exchange.

The causes of the fluctuations of exchange between distant places in an extensive country, or between different countries, are of the same nature, and may occasion a similar transportation of the precious metals from one place to another.  We will hereafter examine how that from one part of the United States to another has been affected by the Bank of the United States.  But there is this difference, between a commercial distress and presumed scarcity of currency, due to internal causes, whilst the foreign exchanges remain favorable, and a similar distress arising from large foreign debts, and accompanied by an unfavorable rate of exchange, that, in the last case, there is an exportation of the coins of the country which cannot take place in the first.  If the same effects, in other respects, are nevertheless the same in both cases ;  if in both, the same, and sometimes general distress equally prevails ;  if the same difficulty occurs in the payment of debts ;  if the same complaint is made of want of money, whether specie is exported or not, it is obvious that there must be another cause, besides an actual scarcity of currency, for the real distress which is felt ;  and that what is called “ want of money,” is not “ want of currency.”  It will be found that this cause is universally overtrading, and that the want of money, as it is called, is the want of exchangeable or saleable property or commodities, and the want of credit.  The man who says that he wants money, could at all times obtain it, if he had either credit or saleable commodities.

Overtrading consists in undertakings or speculations of every possible description, which fail altogether, or of which the returns are slower than, under sanguine expectations, had been calculated, or the proceeds of which, (too many, tempted by temporary high prices or profits, having embarked in the same branch of business,) greatly exceed the demand, and glut the market.  A great loss may be experienced by those who have entered into any such undertakings with their own resources.  But when resting principally on credit, and pursued at the same time by a great portion of the dealers or men of enterprise, a general impossibility of fulfilling previous engagements takes place, which affects even those who are ultimately solvent.  When that mutual confidence, which is the sole foundation of credit, is once shaken, the capitals that are usually loaned can no longer be obtained, the usual amount of bills of exchange, discounted notes, or other commercial papers founded on credit, is lessened, and specie or currency itself becomes comparatively scarce, partly because some is hoarded, principally because a portion of its substitutes is withdrawn from circulation.  Yet specie, under those circumstances, acts but a subordinate part, its scarcity being the effect, and not the cause, of the evil, and the remedy to this consisting in restoring credit and confidence, which will always procure a sufficient amount of currency, and not in an attempt to increase the quantity of currency, which can produce no substantial benefit until confidence is restored.  When it consists of paper founded on credit, any increase is inefficient for remedying the evil, unless it be issued by an institution, the credit of which has, in the general wreck, remained unaffected and unimpaired.

The commencement of the year 1793, was, in England, a season of great and universal commercial distress.  It had, as usual, been preceded by a period of great apparent prosperity, which had stimulated overtrading ;  and this had been followed by its unavoidable consequences.  More than one hundred country banks failed, or suspended their payments ;  the distress was general, the credit of solvent houses was affected, the usual accommodations, which enabled them to have their bills discounted, and to meet the demands against them, were withdrawn, and the complaint of want of money was universal.  Under those circumstances, government interfered, and loaned, or offered to loan, to solvent dealers, five millions sterling in exchequer bills.  The remedy was effectual ;  the whole amount offered to be loaned was not even applied for ;  and, in a very short time, confidence was restored, and every one who was not actually insolvent was able to meet his engagements.  But exchequer bills are not currency, but only a promise to pay currency at the end of one year.  Government did not lend currency, or add a single shilling to its amount.  The credit of individuals had received a severe and general shock, and that of government, which was unimpaired, was substituted for private credit.  Those who had capital to lend, and would not advance it on private security, or who, in other words, would not discount the bills of individuals, lent that capital, or the currency which was wanted, on public security, or, in other words, discounted the exchequer bills, that is to say, the bills of government.  The distress, the pretended want of money, was relieved, not by any additional issues of currency, the amount of which must therefore have been sufficient, but by restoring private confidence and private credit.

It is also evident, that what was then effected by government, might have been done by the Bank of England, had that institution, more sparing of its resources, during the preceding period of prosperity and incautious enterprise, been enabled, when the revulsion took place, to lend its credit to solvent houses, by discounting their bills, and increasing its issues of paper currency.  It may be presumed, that, having already overstrained its resources, the bank could not have done this, without endangering its own credit, and running the risk of being unable to pay its own notes, if their amount was increased.  But the mode adopted by government, and which proved so efficacious, makes it obvious, that, had the bank been enabled, without the aid of the treasury, to relieve the distress, and, what was called the want of money, the relief afforded would have been the result, much less, if at all, of the enlarged issues of bank notes, than of the bank lending its credit to those solvent dealers whose credit was impaired.

As a bank cannot increase its discounts without increasing its circulation, the two operations, being in its hands inseparable, are generally confounded.  The manner in which the British government afforded relief in the year 1793, conclusively proves that they are essentially distinct, even in a country where the currency consists principally of paper founded on credit, and that the demand always made on banks in times of pressure, for enlarged issues of bank notes, is not a demand for currency but for credit.  Cautious and well-directed banks will always afford great relief in such times, if enabled by the previous prudent administration of their affairs to lend their credit to solvent dealers ;  which cannot be done without enlarging their issues.  If, on the contrary, this has already been done to its utmost extent, if during a period of high prices and great apparent prosperity, the spirit of enterprise, naturally excited by that state of things, and which required then to be checked, has, on the contrary, been stimulated by incautious loans and consequent issues of paper on the part of the banks, the result will be, and has everywhere always been, as fatal as unavoidable.  When the revulsion takes place, when, from excessive competition or imprudent speculation, the market becomes glutted with a superabundance of any species of commodity, often in the United States of land itself, or when, from want of skill or any other cause, undertakings have altogether failed, or when the slow returns of such undertakings require years to be realized, and both capital and credit are exhausted ;  at the very time when the aid of banks would be most wanted, those institutions, prematurely disabled, instead of simultaneously enlarging their issues, and lending their credit to solvent but embarrassed dealers, manufacturers, and farmers, are compelled in self defence to contract their issues and loans, and thus greatly to aggravate the evil, which they had at least neglected to check, if they were not instrumental in its growth.

In countries, therefore, the currency of which consists principally of bank paper, banks will have a beneficial or pernicious influence on credit, and on a currency depending on credit, according to the manner in which they may be administered ;  useful when their operations, in prosperous times and whilst under their control, are regulated by probity, great discretion and skill, pernicious when their administration is defective in any of those respects.  But in countries, where the currency consists wholly or principally of the precious metals, and where bankers lend money or discount bills, but do not issue a paper currency, the two operations are never confounded ;  and although not exempt from commercial revulsions, these will be of less common occurrence, and have little or no influence on currency itself.4  It may be confidently affirmed, that the precious metals, under any circumstances whatever, and amidst all the temporary fluctuations arising from a disproportion between supply and demand, continue to be a more permanent standard of value than any other commodity, or any species of paper resting on an element so variable as credit.

We cannot conceal from ourselves, that specie-paying banks are not only exposed to extraordinary drains from abroad, but are also occasionally controlled by moral causes, the effects of which cannot be calculated, nor without great skill and discretion be always prevented.  These never affect a metallic currency, which has an intrinsic value, varying less than that of any other commodity, and not at all depending, as paper, on confidence, fear, conjectures, or any of the fluctuations of public opinion.  It is equally clear, that extraordinary drains of specie, occasionally inconvenient when the currency is purely or principally metallic, may be fatal to one which consists of bank notes convertible at will into specie.  Supposing the currency of a country to consist of one hundred millions, a drain of twenty millions from abroad would produce great inconvenience, but not beyond that of contracting the metallic currency to that extent, until commerce had supplied the deficiency.  But, if consisting of bank notes, sustained by twenty millions of specie in the vaults of the banks, the basis being withdrawn, the whole fabric is at once overthrown, and specie payments must be suspended.

One of the most fatal effects of that suspension is the great and unavoidable distress, which attends a return to a specie currency, particularly when the suspension has been of long continuance.  Whilst this lasts, the loss falls on the creditors :  but new contracts are daily made, founded on the existing state of the currency ;  and should the suspension continue twenty years, as was the case in England, as almost all the contracts in force, and not yet executed, at the time when specie payments are resumed, must have been made when the currency was depreciated, the obligation to discharge them in specie is contrary to equity, fails on the debtors, who are always the part of the community less able to bear the burthen, and proves more calamitous than the suspension had been.  Short in duration as this had been in the United States, the effect was sensibly felt :  and to this cause, which also occasioned the failure of a number of new banks, must in a great degree be ascribed the general distress of the years 1818-1819.  The relief laws of some of the States, and in England the corn laws, may be traced to the same source.  In that country, after so long a suspension of specie payments, the calamity has necessarily been far more extensive and lasting.  It is yet felt, and may still seek for remedies worse than the evil, and call for small notes, excessive issues, and all those measures which would necessarily lead again to an inconvertible paper money.

Considerations of this nature may well have suggested to the committee of the House of Representatives, the question, whether a metallic currency would not, in the United States, have been preferable to one consisting of bank notes.  We would incline to the affirmative, if the system was not already established, and if we believed, that an attempt to return to a pure metallic currency, which could not, without producing great evils, be carried suddenly into effect, was at all practicable.  Were not this the case, we would think, that a system of commercial credit, founded on deposits, bills of exchange, and other negotiable paper, such as is carried on by the bankers of London, and by all the bankers of the Continent of Europe, neither of whom issues any notes in the shape of currency, would afford to commerce, at least in commercial cities, nearly, if not altogether, the same accommodations and advantages which are found in the present system.  Commercial revulsions, and numerous failures amongst dealers, as they may occur wherever there has been excessive overtrading, though less frequent, do nevertheless occasionally take place in countries which have only a metallic currency.  But their effect is generally confined to the dealers, extending but indirectly and feebly to the community, and never affecting the currency, the standard of value, or the contracts between persons not concerned in the failures.  It must be allowed at the same time, that, in the country, where the system of deposits cannot exist to the same extent as in cities, banks soberly and skilfully administered, stimulate industry by the facility which their loans afford to men of enterprise, and that the ability of those banks to make those advances, would be much curtailed, if altogether precluded from issuing notes.

A very ingenious plan was proposed by Mr. Ricardo, and has since been expounded and defended with great talent by Mr. M’Culloch, intended to afford security against the dangers to which every system of paper currency heretofore devised is exposed.  It is not applicable to the United States, as it is founded on the exclusion of gold and silver coins, which, by our Constitution, are alone a legal tender.  Some plausible objections have been made to it, which, for that reason, it is not necessary to discuss ;  and we will only give the outline of the plan.

It consists in the total exclusion of a metallic currency, with the exception perhaps of the silver necessary for small payments, in making the notes of the Bank of England a legal tender, and in imposing on that institution the obligation to pay them, on demand, in gold bars of the proper standard.  This last provision would be sufficient to prevent any depreciation of the notes, whilst, on the other hand, the gold bars paid by the bank could not, either directly, or by being converted into coin, take their place and add any thing to the amount of the currency.  Any call on the bank for gold, would therefore necessarily lessen that amount, and must also necessarily cease, whenever this was somewhat less than the amount in value, which is indispensable in England for the payments in currency.  For whenever this point is reached, the notes must be worth at least as much as their nominal value in gold at its ordinary price ;  and, in the case of unfavorable exchanges, the drain must altogether cease, as soon as the currency is sufficiently contracted to have raised its value to a rate corresponding with that of exchange.  The inconvenience of that contraction would not, it seems, be greater than if the currency was purely metallic.  Supposing forty millions sterling to be the minimum of the absolutely necessary currency under an unfavorable state of foreign exchanges, the community would be protected against the danger of any depreciation in the nominal value of the notes, and the bank, under any circumstances whatever, against a drain that could compel it to suspend its payments, provided the value of the gold bars in its vaults was always equal to the excess of its issues over forty millions.  The plan was carried into effect, during a short period, by the Bank of England, and then discontinued, for reasons which have not been explained, and which it would be interesting to understand.



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[lord edward coke]

Albert Gallatin
Currency and Banking System
1831



The constitutional powers of Congress on the subject, are the next and principal object of inquiry.

We have already adverted to the provisions of the Constitution, which declare, that no state shall either coin money, emit bills of credit, make any thing but gold and silver coins a tender in payment of debts, or pass any law impairing the obligation of contracts, and which vest in Congress the exclusive power to coin money, and to regulate the value thereof, and of foreign coin.  It was obviously the object of the Constitution to consolidate the United States into one nation, so far as regarded all their relations with foreign countries, and that the internal powers of the general government should be applied only to objects necessary for that purpose, or to those few which were deemed essential to the prosperity of the country, and to the general convenience of the people of the several states.  Amongst the objects thus selected, were the power to regulate commerce among the several states, and the control over the monetary system of the country.

This last-mentioned power is, and has ever been, one of primary importance.  It is for want of such general power, that Germany has always been inundated with coins often debased, and varying from state to state in standard and denomination the same defect was found in the former United Provinces of the Netherlands :  and the banks of deposit of Hamburg and Amsterdam, were originally established for the purpose of correcting that evil.  Even under the articles of confederation, Congress had already the sole and exclusive right and power of regulating the alloy and value of coins struck by their own authority, or by that of the respective states.  It was on a most deliberate view of the subject, that the same powers were confirmed and enlarged by the Constitution, and the individual states excluded from any participation, which might interfere with the controlling power of the general government.  With the exception of those which are connected with the foreign relations of the United States, either in war or in peace, there are no powers more expressly and exclusively vested in Congress, of a less disputable nature, or of greater general utility, than those on the subject of currency.  Arbitrary governments have, at various times, in order to defraud their creditors, debased the coin, whilst they preserved its denomination, and thus subverted the standard of value by which the payment of public and private debts, and the performance of contracts, ought to have been regulated.  This flagrant mode of violating public faith has been long proscribed by public opinion.  Governments have, in modern times, substituted for the same purpose issues of paper money, gradually increasing in amount, and decreasing in value.  It was to guard against those evils, that the provisions in the Constitution on that subject were intended :  and it is the duty, not less than the right, of the United States, to carry them into effect.

The first paragraph of the eighth section of the first article, provides that Congress shall have power “ to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defence and general welfare of the United States ;  but all duties, imposts, and excises, shall be uniform throughout the United States.”

It has sometimes been vaguely asserted, though, as we believe, never seriously contended, that the words “ to provide for the common defence and general welfare,” were intended, and might be construed, as a distinct and specific power given to Congress, or, in other words, that that body was thereby invested with a sweeping power, to embrace within its jurisdiction any object whatever, which it might deem conducive to the general welfare of the United States.  This doctrine is obviously untenable, subversive of every barrier in the Constitution which guards the rights of the states or of the people, expressly contradicted by the tenth amendment, which provides, that the powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people ;  and tantamount to an assertion, that there is no Constitution, and that Congress is omnipotent.  Mr. Jefferson stigmatizes this construction as “a grammatical quibble, which has countenanced the general government in a claim of universal power.  For, (he adds,) in the phrase, to lay taxes, to pay the debts and provide for the general welfare, it is a mere question of syntax, whether the two last infinitives are governed by the first, or are distinct and co-ordinate powers ;  a question unequivocally decided by the exact definition of powers, immediately following.”

The words “ to provide for the common defence and general welfare of the United States,” are as obligatory as any other part of the Constitution ;  they cannot be expunged, and must be so construed as to be effective.  Mr. Jefferson did not deny this, which is indeed undeniable ;  and he only contended, that the words did not convey a distinct power, but were governed by the preceding infinitive ;  that is to say, that this clause in the Constitution, instead of giving to Congress the three distinct powers, 1st, to lay taxes, &c., 2dly to pay the debts, 3dly to provide for the common defence and general welfare of the United States, gave only that “ to lay and collect taxes, duties, imposts, and excises, in order to pay the debts and provide for the common defence and general welfare of the United States.”  He states the question as one of syntax, susceptible of only two constructions ;  one which would give, as a distinct, a sweeping power inconsistent with the spirit and other express provisions of the Constitution, and which he accordingly rejects ;  the other, which be adopts, and which admits, but confines the application of the words “ to provide for the general welfare,” to the only power given by that clause, viz. that of laying taxes, duties, &c.

This appears to have been the construction universally given to that clause of the Constitution, by its framers and contemporaneous expounders.  Mr. Hamilton, though widely differing in another respect from Mr. Jefferson in his construction of this clause, agrees with him in limiting the application of the words “ to provide for the general welfare,” to the express power given by the first sentence of the clause.  In his report on manufactures, he contends for the power of Congress to allow bounties for their encouragement, and, after having stated the three qualifications of the power to lay taxes, viz. 1st, that duties, imposts, and excises, should be uniform throughout the United States ;  2nd, that no direct tax should be laid unless in proportion to the census ;  3d, that no duty should be laid on exports ;  he argues on the constitutional question in the following words :

“ These three qualifications excepted, the power to raise money is plenary and indefinite ;  and the objects to which it may be appropriated, are no less comprehensive than the payment of the public debts and the providing for the common defence and general welfare.  The terms ‘general welfare,’ were doubtless intended to signify more than was expressed or imported in those which preceded ;  otherwise numerous exigencies, incident to the affairs of a nation, would have been left without a provision.  The phrase is as comprehensive as any that could have been used ;  because it was not fit that the constitutional authority of the Union to appropriate its revenues, should have been restricted within narrower limits than the ‘ general welfare;’  and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.”

“ It is therefore of necessity left to the discretion of the national legislature, to pronounce upon the objects which concern the general welfare, and for which, under that description, an appropriation of money is requisite and proper.  And there seems to be no room for a doubt, that whatever concerns the general interests of learning, of agriculture, of manufactures, and of commerce, are within the sphere of the national councils, as far as regards an application of money.

“ The only qualification of the generality of the phrase in question, which seems to be admissible, is this ;  that the object to which an appropriation of money is to be made, be general and not local ;  its operation extending, in fact, or by possibility, throughout the Union, and not being confined to a particular spot.”

“ No objection ought to arise to thus construction, from the supposition that it would imply a power to do whatever, else should appear to Congress conducive to the general welfare.  A power to appropriate money with this latitude, which is granted too, in express terms, would not carry a power to any other thing not authorized in the Constitution, either expressly or by fair implication.”

Mr. Hamilton insisted that the power to lay and collect taxes and duties, implied that of appropriating the money thus raised, to any object which Congress might deem conducive to “ the general welfare.”  But he confines throughout the application of those words to the power given, as he understood it, by the first sentence of the clause.  Mr. Jefferson, who agreed with him in that respect, denied altogether that the power to lay taxes implied that of applying the money thus raised to objects conducive to the general welfare.  It cannot be objected to this construction, which is the most literal, that the words “for the general welfare” are thereby rendered of no effect.  For there are several cases, in which the laying a tax or duty does alone effect the object in view, without the aid of an appropriation or of any other distinct act of the legislature.  On that point, however, and on that alone, they differed.  But it is foreign to the object now under consideration, and we do not mean to discuss it.  All that is necessary for us is, that, as admitted by both, the power to lay duties and taxes, is vested in Congress, and may be exercised, to provide (or, in order to provide) for the general welfare of the United States, without any other limitation than the three qualifications specified by the Constitution, and above stated.

It has indeed been lately contended by some distinguished citizens, that the words “general welfare,” referred only to the powers expressly vested in Congress by the Constitution :  or, in other words, that the power to lay duties and taxes could not be exercised but for the purpose of carrying into effect some of those specific powers.  It seems to us, that this, if intended, would have been distinctly expressed, instead of using the words “ general welfare.”  And although it is undeniable, that a constructive power cannot be legitimately claimed, unless necessary and proper for carrying into execution, or fairly implied in, a power expressly delegated ;  we do not perceive why it should be necessary, in order to justify the exercise of a power expressly given, that it should be exercised in reference to an other similar power.  But we do not mean to discuss this question, which is also foreign to our object.  Allowing, for the sake of argument, the validity of the objection, it does not apply to cases where the object, in reference to which the duty or tax is laid, is clearly embraced within the powers of the general government.  Although, because the power to protect manufactures is not expressly vested in Congress, that to lay taxes in order to effect that object should be denied, the power of laying a tax or duty, for the purpose of carrying into effect an express provision of the Constitution, would still be undeniable.

Congress has the power to lay stamp duties on notes, on bank notes, and on any description of bank notes.  That power has already been exercised ;  and the duties may be laid to such an amount, and in such a manner, as may be necessary to effect the abject intended.  This object is not merely to provide generally for the general welfare, but to carry into effect, in conformity with the last paragraph of the eighth section of the first article, those several and express provisions of the Constitution, which vest in Congress exclusively the control over the monetary system of the United States, and more particularly those which imply the necessity of a uniform currency.  The exercise of the power for that object is free of any constitutional objection, provided the duties thus laid shall be uniform, and applied to the Bank of the United States as well as to the state banks.  The act of laying and collecting the duties, which is expressly granted, is alone sufficient to effect the object.  As no appropriation of money is wanted for that purpose, the exercise of power which is required, is purely that of laying duties ;  and it is not liable to the objection, that to assert that the authority to lay taxes implies that of appropriating the proceeds, is a forced construction.  It is equally free of any objection derived from any presumed meaning of the words “ general welfare,” since the power to lay duties will, in this instance, be exercised, in order to carry into effect several express provisions of the Constitution, having the same object in view.  Congress may, if it deems it proper, lay a stamp duty on small notes, which will put an end to their circulation.  It may lay such a duty on all bank notes, as would convert all the banks into banks of discount and deposit only, annihilate the paper currency, and render a Bank of the United States unnecessary in reference to that object.  But if this last measure should be deemed pernicious, or prove impracticable, Congress must resort to other and milder means of regulating the currency of the country.  The Bank of the United States, as has already been shown, was established for that express purpose.

An act incorporating a bank, is not an act either to raise or appropriate money.  The power to establish the bank cannot, in any way, be founded on that clause of the Constitution which has reference to the general welfare of the United States.  It is sanctioned exclusively by that clause which gives to Congress power to make all laws, which shall be necessary and proper for carrying into execution any of the powers vested in the government of the United States.  And the first object of inquiry is the meaning of the words “necessary and proper” in that clause.

We are aware, that it has at times been suggested that the word “ necessary,” in its strict sense, means “ that without which the specific power cannot be carried into effect,” and ought to be so construed.  If appeal be made to verbal criticism, it may be answered, that if such was the meaning of the word “ necessary,” in that sentence, the word “proper” would not have been added ;  since that which is necessary in that strict sense is of necessity proper.  This last expression must, therefore, be taken in connexion with the first ;  and since it was contemplated, that what was called necessary might be proper or improper, the words “laws necessary and proper” do not appear to have been intended in that most limited sense, which implies absolute impossibility of effecting the object without the law, but to mean such laws as are fairly intended, and highly useful and important for that purpose.  We believe this to be the fair, and to have been the uniform construction of the Constitution, and that indeed without which it could not have been carried into effect.  In order to prove that this has ever been deemed the natural and clear construction, we will not resort to the establishment of light-houses, or to other numerous precedents, the authority of which may be disputed.  We will appeal to the most general and important law of the United States, such as it was enacted from the first organization of the government under the Constitution, and to a provision in it, which, under its various other modifications, has uninterruptedly, and without any constitutional objection, remained in force to this day.

The laws to lay and collect duties on imports require, and have always required, a variety of oaths, and particularly that of the importers or consignees, with respect to the correctness of the invoices of goods imported, both as to quantity and as to cost or value.  Yet this provision, however useful and important, is not so absolutely necessary, in that strict sense of the word, as that the laws could not possibly be carried into effect without it.  There are countries, France for example, where those duties are efficiently collected without the assistance of similar oaths.  This may be done at least as effectually by an appraisement of the merchandise, as by resorting to the oaths of the parties.  In point of fact, there has always been a discretionary power to appraise, which has lately been enlarged.  Since it is on that provision, and not on the oath, that the ultimate reliance for the faithful collection of the duties is placed, those duties might be collected without the assistance of oaths, by substituting in every instance an appraisement or valuation.  Oaths are not, therefore, necessary for the collection of duties, in that strict sense which is contended for :  they are not that, without which the duties could not be collected.  The observation indeed applies to various other provisions of the revenue laws.  Any one who will give them a perusal, will find several implying powers not specially vested in Congress, the necessity of which was not absolute, and without which the object of the law might still have been effected.  The oaths and various other provisions have been resorted to, as means only highly useful, important, and proper, but not as being of absolute necessity for carrying the law into effect.*

Whenever it becomes the duty of Congress to carry into effect any of the powers expressly defined by the Constitution, it will generally be found that there are several means to effect the object.  In that case, and whenever there is an option, each of the means proposed ought not to be successively objected to, as not being strictly necessary because other means might be resorted to, since this mode of arguing would defeat the object intended, and prevent the passage of any law for carrying into effect the power, which it was the duty of Congress to execute.  If every provision of a revenue law was successively opposed on that ground, no efficient revenue law could be passed.  In the present case, it is proposed to resort, either to a stamp duty or to a Bank of the United States, in order to regulate the currency.  Unless some other equally efficient mode can be suggested, this important object will be defeated, if both means are successively rejected, as not strictly necessary.  But, on the other hand, the means proposed for carrying into effect any special or expressed power vested in Congress, should be highly useful and important, having clearly and bona fide that object in view which is the avowed purpose, and not be intended, under color of executing a certain special power, for the purpose of effecting another object.

It was on this ground, that the former Bank of the United States was at first opposed.  That Bank had not been proposed for the express purpose of regulating the currency, but as incident to the powers of regulating commerce, of collecting the revenue, of the safe keeping of public moneys, and generally, of carrying on the operations of the Treasury.  There had been at that time but three banks established in the United States ;  their operations were confined within a very narrow sphere ;  there had been no experience in the United States of the utility of a bank in assisting the operations of government, but that which, during a short time, had been afforded by the Bank of North America, incorporated, in the first instance, by Congress, under the articles of confederation.  The Bank of the United States was considered by its opponents, as not being intended for the purpose alleged, but as having for its object the consolidation of a moneyed aristocracy, and to further the views at that time ascribed to a certain party and to its presumed leader.  And the fears then excited respecting that object, and the supposed influence of the Bank in promoting it, though long since dissipated, have left recollections and impressions which may still have some effect on public opinion in relation to the constitutional question.

Experience, however, has since confirmed the great utility and importance of a Bank of the United States, in its connexion with the Treasury.  The first great advantage derived from it, consists in the safe keeping of the public moneys, securing, in the first instance, the immediate payment of those received by the principal collectors, and affording a constant check on all their transactions ;  and afterwards rendering a defalcation in the moneys once paid, and whilst nominally in the Treasury, absolutely impossible.  The next and not less important benefit is to be found in the perfect facility with which all the public payments are made by checks, or Treasury drafts, payable at any place where the Bank has an office ;  all those who have demands against government, are paid in the place most convenient to them ;  and the public moneys are transferred, through our extensive territory, at a moment’s warning, without any risk or expense, to the places most remote from those of collection, and wherever public exigencies may require.  From the year 1791 to this day, the operations of the Treasury have, without interruption, been carried on through the medium of banks ;  during the years 1811 to 1816, through the state banks ;  before and since, through the Bank of the United States.  Every individual who has been at the head of that department, and, as we believe, every officer connected with it, has been made sensible of the great difficulties, that must be encountered without the assistance of those institutions, and of the comparative ease and great additional security to the public, with which their public duties are performed through the means of the banks.  To insist that the operations of the Treasury may be carried on with equal facility and safety, through the aid of the state banks, without the interposition of a Bank of the United States, would be contrary to fact and experience.  That great assistance was received from the state banks, while there was no other, has always been freely and cheerfully acknowledged.  But it is impossible, in the nature of things, that the necessary concert could be made to exist between thirty different institutions ;  and in some instances, heavy pecuniary losses, well known at the seat of government, have been experienced.  To admit, however, that state banks are necessary for that purpose, is to give up the question.  To admit that banks are indispensable for carrying into effect the legitimate operations of government, is to admit that Congress has the power to establish a bank.  The general government is not made by the Constitution to depend, for carrying into effect powers vested in it, on the uncertain aid of institutions, created by other authorities, and which are not at all under its control.  It is expressly authorized to carry those powers into effect by its own means, by passing the laws necessary and proper for that purpose, and in this instance, by establishing its own bank, instead of being obliged to resort to those which derive their existence from another source, and are under the exclusive control of the different states, by which they have been established.

It must at the same time be acknowledged, that, inasmuch as the revenue may be collected, and the public moneys may be kept in public chests, and transferred to distant places without the assistance of banks, and as all this was once done in the United States, and continues to be done in several countries, without any public bank, it cannot be asserted, that those institutions are absolutely necessary for those purposes, if we take the word “necessary” in that strict sense which has been alluded to.  All this may be done, though with a greater risk, and in a more inconvenient and expensive manner.  Public chests might be established, and public receivers, or sub-treasurers, might be appointed in the same places where there are now offices of the Bank of the United States, and specie might be transported from place to place, as the public service required it, or inland bills of exchange purchased from individuals.2  The superior security and convenience afforded by the bank, in the fiscal operations of government, may not be considered as sufficient to make its establishment constitutional, in the opinion of those who construe the word “necessary” in that strict sense.

But it is far from being on that ground alone, that the question of constitutionality is now placed.  It was not at all anticipated, at the time when the former Bank of the United States was first proposed, and when constitutional objections were raised against it, that bank notes issued by multiplied state banks, gradually superseding the use of gold and silver, would become the general currency of the country.  The effect of the few banks then existing, had not been felt beyond the three cities where they had been established.  The states were forbidden by the Constitution to issue bills of credit :  bank notes are bills of credit to all intents and purposes ;  and the state could not do, through others, what it was not authorized to do itself :  but the bank notes, not being issued on the credit of the states, nor guarantied by them, were not considered as being, under the Constitution, bills of credit emitted by the states.  Subsequent events have shown, that the notes of state banks, pervading the whole country, might produce the very effect which the Constitution, had intended to prevent, by prohibiting the emission of bills of credit by any state.  The injustice to individuals, the embarrassments of government, the depreciation of the currency, its want of uniformity, the moral necessity imposed on the community, either to receive that unsound currency, or to suspend every payment, purchase, sale, or other transaction, incident to the wants of society, all the evils which followed the suspension of specie payments, have been as great, if not greater, than those which might have been inflicted by a paper currency, issued under the authority of any state.  We have already adverted to the several provisions of the Constitution, which gave to Congress the right, and imposed on it the duty to provide a remedy ;  but there is one which deserves special consideration.

Whatever consequences may have attended the suspension of specie payments in Great Britain, there still remained one currency which regulated all the others.  All the country bankers were compelled to pay their own notes, if not in specie, at least in notes of the Bank of England.  These notes were, as a standard of value, substituted for gold :  and, if the currency of the country was depreciated, and fluctuating in value from time to time, it was at the same time uniform throughout the country.  There was but one currency for the whole, and every variation in its value was uniform as to places, and at the same moment operated in the same manner everywhere.  But the currency of the United States, or, to speak more correctly, of the several states, varied, during the suspension of specie payments, not only from time to time, but at the same time from state to state, and in the same state from place to place.  In New-England, where those payments were not discontinued, the currency was equal in value to specie :  it was, at the same time, at a discount of seven per cent. in New-York and Charleston, of fifteen in Philadelphia, of twenty and twenty-five in Baltimore and Washington, with every other possible variation in other places and states.

The currency of the United States, in which the public and private debts were paid, and the public revenue collected, not only was generally depreciated, but was also defective in respect to uniformity.  Independent of all the other clauses in the Constitution which relate to that subject, it is specially provided, 1st, that all duties, imposts, and excises, shall be uniform throughout the United States ;  2d, that representative and direct taxes shall be apportioned among the several states, according to their respective numbers, to be determined by the rule therein specified ;  and that no capitation or other direct tax shall be laid, unless in proportion to the enumeration.  Both these provisions were violated whilst the suspension of specie payments continued.  It is clear, that after the quota of the direct tax of each state had been determined, according to the rule prescribed by the Constitution, it was substantially changed by being collected in currencies differing in value in the several states.  It is not less clear, that the clause which prescribes a uniformity of duties, imposts, and excises, was equally violated by collecting every description of indirect duties and taxes in currencies of different value.  The only remedy existing at that time, was the permission to pay direct and indirect taxes in treasury notes.  But those notes did not pervade every part of the country in the same manner as bank notes ;  they were of too high denomination to be used in the payment of almost any internal tax ;  they were liable also to vary in value in the different states ;  and they could operate as a remedy, only as long as their depreciation was greater than that of the most depreciated notes in circulation.

We will now ask, whether, independent of every other consideration, Congress was not authorized and bound to pass the laws necessary and proper for carrying into effect, with good faith, those provisions of the Constitution ? and whether that could or can be done, in any other manner than, either by reverting to a purely metallic, or by substituting a uniform paper currency to that which had proved so essentially defective in that respect, and which, from its not being subject to one and the same control, is, and for ever will be, liable to that defect ?  The uniformity of duties and taxes of every description, whether internal or external, direct or indirect, is an essential and fundamental principle of the Constitution.  It is self-evident, that that uniformity cannot be carried into effect without a corresponding uniformity of currency.  Without laws to this effect, it is absolutely impossible that the taxes and duties should be uniform, as the Constitution prescribes :  such laws are therefore necessary and proper, in the most strict sense of the words.  There are but two means of effecting the object, a metallic, or a uniform paper currency.  Congress has the option of either ;  and either of the two, which may appear the most eligible, will be strictly constitutional, because strictly necessary and proper for carrying into effect the object.  If a currency exclusively metallic is preferred, the object will be attained by laying prohibitory stamp duties on bank notes of every description, and without exception.  If it is deemed more eligible, under existing circumstances, instead of subverting the whole banking system of the United States, and depriving the community of the accommodations which bank loans afford, to resort to less harsh means ;  recourse must be had to such, as will insure a currency sound and uniform itself, and at the same time check and regulate that which will continue to constitute the greater part of the currency of the country.

Both those advantages were anticipated in the establishment of the Bank of the United States ;  and it appears to us that the bank fulfils both those conditions.  As respects the past, it is a matter of fact, that specie payments were restored and have been maintained through the instrumentality of that institution.  It gives a complete guarantee, that under any circumstances, its notes will preserve the same uniformity which they now possess.  Placed under the control of the general government, relying for its existence on the correctness, prudence, and skill with which it shall be administered, perpetually watched and occasionally checked by both the Treasury Department and rival institutions ;  and without a monopoly, yet with a capital and resources adequate to the object for which it was established ;  the bank also affords the strongest security which can be given with respect to paper, not only for its ultimate solvency, but also for the uninterrupted soundness of its currency.  The statements we have given of its progressive and present situation, show how far those expectations have heretofore been realized.

Those statements also show, that the Bank of the United States, wherever its operations have been extended, has effectually checked excessive issues on the part of the state banks, if not in every instance, certainly in the aggregate.  They had, been reduced, before the year 1820, from sixty-six to less than forty millions.  At that time, those of the Bank of the United States fell short of four millions.  The increased amount required by the increase of population and wealth during the ten ensuing years, has been supplied in a much greater proportion by that bank than by those of the states.  With a treble capital, they have added little more than eight millions to their issues.  Those of the Bank of the United States were nominally twelve, in reality about eleven millions greater in November 1829, than in November 1819.  The whole amount of the paper currency has, during those ten years, increased about forty-five, and that portion which is issued by the state banks only twenty-two and a half per cent.  We have indeed a proof, not very acceptable perhaps to the bank, but conclusive of the fact, that it has performed the office required of it in that respect.  The general complaints, on the part of many of the state banks, that they are checked and controlled in their operations by the Bank of the United States, that, to use a common expression, it operates as a screw, is the best evidence that its general operation is such as had been intended.  It was for that very purpose that the bank was established.  We are not, however, aware that a single solvent bank has been injured by that of the United States, though many have undoubtedly been restrained in the extent of their operations, much more than was desirable to them.  This is certainly inconvenient to some of the banks, but in its general effects is a public benefit to the community.  The best way to judge whether, in performing that unpopular duty, the Bank of the United States has checked the operations of the state banks more than was necessary, and has abused, in order to enrich itself at their expense, the power which was given for another purpose, is to compare their respective situations in the aggregate.  In order to avoid any erroneous inference, we will put out of question those banks of which we could only make an estimate, and compare, with that of the United States, those only of which we have actual returns.

The profit of banks, beyond the interest on their own capital, consists in that which they receive on the difference between the aggregate of their deposits and notes in circulation, and the amount of specie in their vaults.  We have given the aggregate situation for the end of the year 1829 of 281 banks with a capital of 95,003,557 dollars, the deposits and circulating notes of which amounted together to ............ $71,706,033
from which deducting the specie in their vaults,...................1,989,643
leaves for the said difference, ..............................................59,716,390
or 62.8 per cent. on their capital.

The notes in circulation of the Bank of the United States (adding one million for its drafts in circulation) amounted in November 1829, to $14,042,984, and together with the deposits, to....................$28,827,793
from which deducting the specie in its vaults,.....................7,175,274
leaves for the difference,.....................................................21,652,519
or 61.8 on its capital.

It is clear that those state banks, taken in the aggregate, have no just reason to complain, since that of the United States imposes no greater restraints on them than on itself.  It will also be perceived that it had in specie, more than one-fifth part of the aggregate of its notes in circulation and deposits ;  whilst the state banks had little more than one-sixth ;  and the Bank of the United States had in addition a fund of about one million of dollars in Europe.  The difference would have been more striking, had we taken a view of the situation of all the state banks, including those on estimate ;  for the difference between the aggregate of their notes and deposits, and their specie, is 67¼ on their capital.

This view of the subject applies to the present time, when the Bank of the United States has surmounted the difficulties which it had, in its origin, to encounter, and has reached a high degree of prosperity.  It did not go into operation till the commencement of the year 1817, and such were the losses which it first experienced, that its dividends, during the first six years of its existence, fell short of 3½ per cent. a year.  The dividend has since gradually increased from 5 to 7 per cent.;  but the average, during the thirteen years and a half ending on the 1st of July 1830, has been but 4.33 per cent. a year.  An annual dividend of about 9 per cent., during the residue of the time to which the charter is limited, would be necessary, in order that the stockholders should then have received, on an average, 6 per cent. a year on their capital.  The dividends of the state banks vary too much, and our returns are too imperfect in that respect, to enable us to estimate the average ;  but it has certainly far exceeded that of the Bank of the United States.

The manner in which the Bank checks the issues of the state banks is equally simple and obvious.  It consists in receiving the notes of all those which are solvent, and requiring payment from time to time, without suffering the balance due by any to become too large.  Those notes on hand, taking the average of the three and a half last years, amount always to about a million and a half of dollars ;  and the balances due by the banks in account current (deducting balances due to some) to about nine hundred thousand.  We think that we may say, that, on this operation, which requires particular attention and vigilance, and must be carried on with great firmness and due forbearance, depends almost exclusively the stability of the currency of the country.

The President of the United States has expressed the opinion, that the bank had failed in the great end of establishing a uniform and sound currency, and has suggested the expediency of establishing “ a National Bank, founded upon the credit of the government and its revenues.”  He has clearly seen, that the uniformity of the currency was a fundamental principle derived from the Constitution, and that this, unless the United States reverted to a purely metallic currency, could not be effected without the aid of a National Bank.  But it appears to us, that the objection of want of uniformity, which may be supported in one sense, though not in the constitutional sense of the word, applies generally to a paper currency, and not particularly to that which is issued by the Bank of the United States.  And although we are clearly of opinion, that the United States at large are entitled to the pecuniary profit arising from the substitution of a paper, for a metallic currency, we are not less convinced, that this object cannot be attained in a more eligible way and more free of objections, than through the medium of a National Bank, constituted on the same principles as that now existing.  On both those topics we will make but few observations, those branches of the subject having been nearly exhausted, in their report, by the Committee of the House of Representatives.

It has already been observed, that the substitution of paper to gold and silver is a national benefit, in as far as it brings into activity an additional circulating capital, equal to the difference between the amount of paper, and that of the reserve in specie necessary to sustain the par value of that paper.  But it is clear, that the community derives no other immediate benefit from the substitution, than the accommodations which the banks are thereby enabled to afford, and for which the borrowers pay the usual rate of interest.  The immediate profit derived from the paper currency, is received exclusively by the banks ;  about three-fourths by the state banks, and one-fourth by that of the United States.  So far as relates to profit, it is only to that one-fourth part of the whole, that the measures of the general government are intended to apply.  Several of the states, by levying a tax on the capital or on the dividends of their own banks, receive the public share of those profits.  Other states have resorted to the mode suggested by the President, and have established banks of the state exclusively founded on its resources and revenue.

The proposition has not been suggested to resort to a third, though the most simple mode, that of issuing, without the aid or machinery of any bank whatever, a government paper payable on demand in specie.  We unite in considering it altogether inadmissible.  Government may put its paper in circulation by lending it, like banks, to individuals ;  and this is, in fact, the proposition which has been suggested.  But unless this mode is adopted, to issue paper in any other way, is to borrow money ;  and the United States at this time wish to discharge and not to contract a debt.  Nor would such a paper, without a mixture of banking operations, control in the least the issues of state banks, and assist in establishing a general sound currency.

The general objections to a paper issued by government, have already been stated at large.  Yet it must be admitted, that there may be times when every other consideration must yield to the superior necessity of saving or defending the country.  If there ever was a time, or a cause which justified a resort to that measure, it was the war of the independence.  It would be doing gross injustice to the authors of the revolution and founders of that independence, to confound them with those governments, which from ambitious views have, without necessity, inflicted that calamity on their subjects.  The old Congress, as the name purports, were only an assembly of plenipotentiaries, delegated by the several colonies or states.  They could only recommend, and had not the power to lay taxes ;  the country was comparatively poor ;  extraordinary exertions were necessary to resist the formidable power of Great Britain ;  those exertions were made, and absorbed all the local resources ; the paper money carried the United States through the most arduous and perilous stages of the war ;  and, though operating as a most unequal tax, it cannot be denied that it saved the country.  Mr. Jefferson was strongly impressed with the recollection of those portentous times, when in the latter end of the year 1814, he suggested the propriety of a gradual issue, by government, of two hundred millions of dollars in paper.  He had, from the imperfect data in his possession, greatly overrated the amount of paper currency which could be sustained at par ;  and he had, on the other hand, underrated the great expenses of the war.  Yet we doubt whether, in the state to which the banks and the currency had been reduced, much greater issues of Treasury notes, or other paper not convertible at will into specie, would not have become necessary, if the war had been of much longer continuance.  It is to be hoped that a similar state of things will not again occur ;  but at all events, the issue of a government paper ought to be kept in reserve for extraordinary exigencies.

[lord edward coke]

The proposition then recurs, to issue a paper currency payable on demand in specie, through the medium of a bank, founded on the revenue of the United States ;  or, in other words, to convert the general government, or its treasury department, into a banking institution.  The experiment has been made in four of the states, and may have succeeded on a smaller scale, and where all the agents are personally known to government, and are not merely in name, but in reality, under its immediate superintendence.  But if thirty-five millions of dollars are to be placed at the disposal of three hundred bank directors, selected by the government of the United States, and living in twenty-five different states or territories, with the authority to contract debts in behalf of the public to an equal amount, and to lend the whole to individuals at their discretion ;  we must inquire, how and over whom that enormous power will be exercised.  However they may have differed with respect to removals from office, the various administrations, with some exceptions, commanded by the public interest, have all preferred, in appointing to office, their friends to their opponents ;  and in making the selections at a distance, there is not perhaps, out of ten officers who are appointed, one who is personally known either to the President or to any of the heads of the departments.  It is morally impossible that the direction of the branches of the proposed bank should not fall into the hands of men generally selected from political considerations, often of a local nature.  Without salary, or any personal interest in the concern intrusted to their care, they would also be altogether irresponsible.  The duties of the other officers of government may always be, and always are, defined by law :  for any wilful official misconduct, for any act of oppression towards individuals, they may be prosecuted and punished.  But the power vested in a bank director is in its nature discretionary, and error of judgment may always be pleaded, for having improperly granted or withdrawn an accommodation.  The exercise of that arbitrary power over the property and private concerns of individuals would be so odious, that, if the attempt was made, we are confident that it would not be long tolerated.  Considered as a source of profit, which is its only recommendation, it is equally obvious, that the plan could not succeed ;  that whenever there was a temporary pressure, and what is called a want of money, the debtors would ask and obtain relief, and that the same measure of indulgence would gradually be extended to every quarter of the Union.  It seems indeed self-evident, that a government, constituted like that of the United States, cannot by itself manage and control a banking system spread over their extensive territory ;  and we know, on the other hand, that the same object may be attained through the means of a bank governed and controlled as that of the United States.  It may be added, that, if an objection is raised against that institution, because the power to incorporate a bank is not expressly granted by the Constitution, it appears to be equally applicable to the plan that has been suggested ;  since there is no clause in that instrument, that expressly authorizes the government of the United States to discount the notes of individuals, or to become a trading company.

The United States are, however, justly entitled to participate in the advantages which the bank derives from its charter, by being permitted to issue paper, and to extend its operations over the whole country ;  and that institution must also be allowed, in addition to the usual interest on its capital, a reasonable profit ;  since it incurs all the risks, and is liable for all the losses incident to those operations.  The government receives already a portion of the profits, in the shape of those services, which are rendered here gratuitously, and form in England no inconsiderable part of the benefit allowed to the bank.  But for the residue, we would prefer to a bonus, either a moderate interest on the public deposits, or a participation in the dividends when exceeding a certain rate.  There can be no doubt, that, independent of perfect security, the United States would, in that way, derive greater pecuniary advantages, than from any bank managed by its own officers.

In order to attain perfect uniformity, the value of a paper currency should, in the United States, be always the same as that of the gold and silver coins, of which it takes the place.  It is impossible to fulfil that condition better, than by making that currency payable on demand in specie and at par.  This cannot be done but at certain places designated for that purpose.  The holder of a bank note cannot, at any other place, give such note in payment of a debt, or exchange it for specie, without the consent of another party.  Strictly speaking, it is not, therefore, at any other place, of the same value with specie.  This is equally true of any bank note, or convertible paper, in any other country.  A note of the Bank of England, being only payable in London, will not be of the same value with gold or silver in Scotland, Ireland, or even at Liverpool, unless the exchange between those places respectively and London should be at par.  This defect is inherent to every species of paper currency, even when payable on demand.  There were three hundred and twenty-nine state banks, and twenty-two offices of the Bank of the United States, in operation on the 1st of January, 1830.  We had therefore three hundred and fifty-one distinct currencies, all convertible into specie, but each at different places.  A note of the Bank of the United States, or of the Bank of North America, both payable at Philadelphia, was no more exchangeable for gold or silver, at Bedford, in Pennsylvania, than at Cincinnati ;  the only difference consisting in the greater distance from the place of payment, which renders a fluctuation in the rate of exchange more probable.  When, therefore, it is objected as a want of uniformity, that the notes issued by the Bank of the United States, and its several offices, are not indiscriminately made payable at every one of those places, the objection does not go far enough.  In order to attain perfect uniformity, or to render those notes everywhere precisely equal in value to specie, they should be made payable at every town or village in the United States.  But, although it may be admitted, that the notes of the Bank of the United States now consist nominally of twenty-four currencies, each payable at a distinct place, they still fulfil the condition of uniformity required by the Constitution ;  and the defect complained of is not peculiar to them, but would equally attach to any other possible species of bank notes or paper currency.

Those notes, wherever made payable, are, by the charter, receivable in all payments to the United States :  and as the bank is obliged, without any allowance on account of difference of exchange, to transfer the public funds from place to place within the United States, any loss arising from that cause falls on the institution.  For that purpose, therefore, all the notes issued by the bank constitute but one uniform currency, with which all the duties, taxes, imposts, and excises, may be paid.  Not only the condition of uniformity imposed by the Constitution is strictly fulfilled, but by far the greater part of the notes which may happen to circulate out of the states in which they are made payable, is also absorbed by that operation.  The objection is reduced to the simple fact, that individuals who may still hold such notes, cannot always exchange, them at par at a place distant from that where they are payable.  In answer to this, it must, in the first place, be observed, that notes are never found in that situation, but by the act of the parties themselves.  The bank and its offices never issue or make payments in notes payable at another place than that of issue, but at the request of individuals, whose convenience it may suit to apply for such notes.  Through whatever channel a man residing in New-Orleans may have come in possession of ten thousand dollars in notes payable at Charleston, it has always been with his own consent, and never by the act of the bank.  When this objection is made, what in fact is complained of, is, that the bank will not, or cannot, transfer the funds of individuals, as well as those of the public, from place to place, gratuitously ;  an operation which has no connexion with the uniformity of currency.  Supposing there were no bank notes in circulation, and there was no other but a uniform metallic currency, the man who had taken a cargo of flour from Louisville to New-Orleans, must, in order to transfer the proceeds back to Louisville, either have purchased a bill of exchange, or transported the specie.  This he may still do, since the institution of the bank ;  and he has no more right to ask from the office at New-Orleans, to give him, in exchange for the specie, bank notes payable at Louisville, than to require that it should pay the freight of his flour from Louisville to New-Orleans.

But supposing there was any weight in the objection, it is inherent to the nature of a paper, which cannot, in that respect, be made better than a metallic currency.  If A contracts to pay a certain sum to B, it must be at a certain specified place.  He cannot engage to do it at five or six different places, at the option of B, since it would compel him to provide funds at all those different places, and therefore to five or six times the amount of his debt.  It is true, that the Bank of the United States has, through its extensive dealings in exchange, facilities to give accommodations in that respect, which no individual can have.  But it is its interest to extend, as far as is safe and practicable, the circulation of its notes ;  and one of the best means to effect that object, is to pay everywhere their notes, wherever issued, whenever that is practicable.  The five dollar notes are already made thus payable ;  and, in reality, payment of notes of every denomination, wherever made payable, is rarely refused at any of the offices.  The bank may be safely trusted for giving the greatest possible extension to a species of accommodation, which it is its interest to give :  but the condition can never he made obligatory, either on that institution, or on any other bank, by whatever name designated, or on whatever principle constituted, without endangering its safety.  It is obvious, that no bank which has branches, can have funds at every place sufficient to meet a sudden demand for the payment of a large amount of notes payable elsewhere, which may fortuitously or designedly have accumulated at some one place.  Even supposing this to be practicable, the condition imposed must necessarily occasion an additional expense, much greater than the benefit derived from it ;  and if this was done through the means of a bank founded on the public revenue, it would be a tax laid on the community, for the advantage of a few individuals.

A similar objection has been made with respect to the dealings in domestic exchange of the bank.  These consist of two correlative but distinct operations.  The bank purchases at Philadelphia, and at every one of its offices, bills of exchange payable at different dates, and on all parts of the United States where there are such offices ;  and the bank and its offices sell their drafts on each other, payable at sight.  The amount of both has been progressively increasing, to the great convenience of the public.  That of bills of exchange was 29,335,254, and that of bank drafts 24,384,232 dollars, during the year 1829.  In the same year the transfers of public moneys, which are effected by treasury drafts, analogous to bills of exchange at sight, have amounted to 9,006,000 dollars.  The three items together make a total of 62,785,486 dollars, transmitted by the bank in one year, through the medium of bills and drafts, which are thus substituted to the transportation of specie to the same amount.  The purchase of bills of exchange is an operation similar, as relates to interest, to the discounting of notes.  The interest accruing, from the time of purchase or discount to that when they become due, is equally allowed in both cases.  Deducting this, the gross profit, on the purchase of bills, arising from the rate of exchange at which they were purchased, amounted in the year 1829 to 227,224 dollars, or less than three-fourths per cent.  The premiums on the sale of bank drafts amounted to 42,826 dollars ;  but to this must be added the interest accruing on the, drafts actually in circulation, and which, estimating, as before stated, the time during which, on an average, they remain so, at fifteen days, amounts to near sixty-one thousand dollars.  The profit on those drafts is therefore near one hundred and four thousand dollars, or about three-sevenths per cent.  The interest lost by the bank on the treasury drafts, is from fifteen to twenty thousand dollars ;  and the charges for transportation of specie, postage, and incidental expenses, amounted, in the year 1829, to 49,847 dollars.  The nett profit of the bank, on the aggregate of those transactions, is, therefore, about two hundred and sixty-four thousand dollars, or a fraction more than two-fifths per cent. on the whole amount.

There is not, it is believed, a single country where the community is, in that respect, served with less risk or expense.  It is obvious that no one will sell his bills to the bank, unless that institution purchases them at a higher, or at least as high rate as any other person ;  and that no one will purchase its drafts, unless they are as cheap as any others at market, or are considered safer.  There is no other ground of complaint, unless it be that the bank can afford to purchase bills dearer, and to sell its drafts cheaper, than any body else.  This is certainly a public benefit ;  and the only consideration which has been urged with some degree of plausibility, is, that one of the reasons which enables the bank to obtain a higher price for its drafts, is the greater degree of security which they offer ;  whilst, at the same time, its peculiar situation would enable it to sell them cheaper than other persons.  Without admitting the validity of this observation, or denying that the current rate of exchange ought to regulate the price of those drafts, we would wish that they might be sold at par, whenever it happens that the operation, from the situation of its funds, is in no degree inconvenient to the bank.  Government receives its full share of the profits on those operations.  As its business is done gratuitously, it not only saves the interest as above stated, but also the premium which it would otherwise have to pay on the sale of its drafts.  This, calculated at the same rate as for other bills of exchange, would amount to more than seventy, and together with the interest, to about ninety thousand dollars a year.

We have also heard complaints made against the purchase of foreign bills by the bank at the south, and the sale of their own bills on Europe at the east.  That this may interfere with the business of capitalists who deal in exchange, is true ;  but the principal public consideration seems to be, whether the bank confers a benefit on the southern planters or merchants, by entering into competition for the purchase of their bills, and on the public by offering for sale cheaper or safer means of making remittances abroad.  Another great advantage is found in the facility, thereby afforded to the bank, of having a fund in England on which it receives interest, and which, on an emergency, answers the same purpose as specie.  That branch of business, either for the year 1829, or for the average of that and the two preceding years, amounted to 3,580,000 dollars.

The principal advantages derived from the Bank of the United States, which no state bank, and, as it appears to us, no bank established on different principles, could afford, are, therefore First and principally ;  securing with certainty a uniform, and as far as paper can, a sound currency :  Secondly ;  the complete security and great facility it affords to government in its fiscal operations :  Thirdly ;  the great convenience and benefit accruing to the community, from its extensive transactions in domestic bills of exchange and inland drafts.  We have not adverted to the aid which may be expected from that institution in time of war, and which should, we think, be confined to two objects.

First.  The experience of the last war has sufficiently proved, that an efficient revenue must be provided, before, or immediately after that event takes place.  Resort must be had, for that purpose, to a system of internal taxation, not engrafted on taxes previously existing, but which must be at once created.  The utmost diligence and skill cannot render such new taxes productive before twelve or eighteen months.  The estimated amount must be anticipated ;  and advances to that extent, including at least the estimated proceeds of one year of all the additional taxes laid during the war, may justly be expected from the Bank of the United States.

Secondly.  It will also be expected, that it will powerfully assist in raising the necessary loans, not by taking up, on its own account, any sum beyond what may be entirely convenient and consistent with the safety and primary object of the institution, but by affording facilities to the money lenders.  Those, who, in the first instance, subscribe to a public loan, do not intend to keep the whole, but expect to distribute it gradually with a reasonable profit.  The greatest inducement, in order to obtain loans on moderate terms, consists in the probability that, if that distribution proceeds slower than had been anticipated, the subscribers will not be compelled, in order to pay their instalments, to sell the stock, and, by glutting the market, to sell it at a loss and the assistance expected from the bank is to advance, on a deposit of the scrip, after the two first instalments have been paid, such portions of each succeeding payment, as may enable the subscribers to hold the stock a reasonable length of time.  As this operation may be renewed annually, on each successive loan, whilst the war continues, the aid afforded in that manner is far more useful than large direct advances to government, which always cripple the resources, and may endanger the safety of a bank.


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NOTES AND STATEMENTS.

NOTE A.
RELATIVE VALUE OF GOLD AND SILVER.




It has already been observed, that the intrinsic value and average market price of current coins are greater than those of bullion of the same weight and standard ;  and that the difference is, on account of the greater comparative expense of coinage, greater with respect to silver than to gold coins.  The ratio of 15.7 to 1 is nearly that of gold to silver bullion in France, and it has been found to correspond, during a long period, with the market price in that country ;  whilst the average price of the gold and silver coins has been in the ratio of about 15.6 to 1, making a difference of about 5/8 per cent. between the two ratios.  The English market is, with respect to silver, much more uncertain, from the want of a constant demand and uniform mint price.  Silver is accordingly exported in preference to France, and gold to England.  The respective prices, as quoted in England, give the ratio of gold coins to silver bullion.  If this average ratio is taken at 15.85 to 1, and the average English market price of standard gold bullion at  77 7½, the ratio of gold to silver bullion will be found to be less than 15.8 to 1;  and, making the above-mentioned allowance of 5/8 per cent. for the difference between the two ratios, that of gold to silver coins, as deduced from the British average market prices, does not exceed 15.7 to 1.  It is, in order to guard against any exportation of silver, in preference to gold coins, and any possible danger of altering the present standard of value, that we are desirous that this ratio should not be exceeded.  The premium on gold coins in France, has, in the text, been generally rated at one half per cent.  The true average taken for six years was only one-third per cent.




NOTE B.

ON SCOTCH BANKS.




Chiefly extracted from the Report of the Select Committee of the House of Commons on Promissory Notes of Scotland and Ireland, May 26, 1826.



EXTRACT.



“ There are at present thirty-two banks in Scotland, three of which are incorporated by act of Parliament, or by royal charter, viz. The Bank of Scotland, the Royal Bank of Scotland, and the Bank called the British Linen Company.

The National Bank of Scotland has 1238 partners.

The Commercial Bank of Scotland has 521.

The Aberdeen Town and County Bank has 446.

Of the remaining banks there are three in which the number of partners exceeds 100;  six in which the number is between 20 and 100;  and seventeen in which the number falls short of 20.

The greater part of the Scotch banks have branches in connexion with the principal establishment, each branch managed by an agent acting under the immediate directions of his employers, and giving security to them for his conduct.

The Bank of Scotland had, at the date of the last return received by your committee, sixteen branches, established at various periods between the year 1774 and the present.

The British Linen Company had twenty-seven branches.  The Commercial Banking Company in Edinburgh, thirty-one.

The total number of branches established in Scotland from the southern border to Thurso, the most northerly point at which a branch bank exists, is one hundred and thirty-three.

Speaking generally, the business of a Scotch bank consists chiefly in the receipt an charge of sums deposited with the bank, on which an interest is allowed, and in the issue of promissory notes upon the discount of bills, and upon advances of money made by the bank upon what is called a cash credit.

The interest allowed by a bank upon deposits varies from time to time, according to the current rate of interest which money generally bears.  At present the interest allowed upon deposits is four per cent.

It has been calculated that the aggregate amount of the sums deposited with the Scotch banks amounts to about twenty or twenty-one millions.  The precise accuracy of such an estimate cannot of course be relied on.  The witness by whom it was made thought that the amount of deposits could not be less than sixteen millions, nor exceed twenty-five millions, and took an intermediate sum as the probable amount.

Another witness, who had been connected for many years with different banks in Scotland, and has had experience of their concerns at Stirling, Edinburgh, Perth, Aberdeen and Glasgow, stated that more than one-half of the deposits in the banks with which he had been connected were in sums from ten pounds to two hundred pounds.”

* * * * * * * * * * * * * *

“ On sums advanced by the banks on the discount of bills of exchange, and upon cash credits, an interest of five per cent. is at present charged.

A cash credit is an undertaking on the part of a bank to advance to an individual such sums of money as he may from time to time require, not exceeding in the whole a certain definite amount, the individual to whom the credit is given entering into a bond with securities, generally two in number, for the repayment on demand of the sums actually advanced, with interest upon each issue from the day on which it is made.

Cash credits are rarely given for sums below one hundred pounds ;  they generally range from two to five hundred pounds, sometimes reaching one thousand pounds, and occasionally a larger sum.

The bank allows the party having the cash credit, to liquidate any portion of his debt to the bank, at any time that may suit his convenience, and reserves to itself the power of cancelling, whenever it shall think fit, the credit granted.”



The amount of deposits, on which the Scotch banks allow interest, may be estimated at about £18,000,000 sterling.  One-half is said to consist of small sums deposited by mechanics, fishermen, and laborers ;  and that part of the system may be considered as analogous to that of the Saving Banks, and as having the same beneficial effect.

The cash credits are generally for sums from 200 to 500 pounds, sometimes as high as £1000, and sometimes as low as £50.  The total amount, for which credits are opened, is estimated at six, and the average amount actually drawn, and due to the banks, at four millions sterling.  They are generally granted to shopkeepers commencing business, and to tradesmen generally.  The great advantage of this system, which is thus far substituted to the discounting of notes, is, that the borrower never draws more from the bank than what is absolutely necessary for the purposes of his business.  The banks require that the capital loaned should be actively and constantly employed.  One of the witnesses says, “ I would say that no cash account is at all well operated upon, unless, at the close of it in a year, the amount of the transactions on each side is, at the very least, five times the amount of the grant.  When the account continues stagnant for any length of time, we intimate to the holder, that, at a fixed period, he must pay it up.”

The total amount of the notes in circulation is stated for 1825 :
in notes of £5 and upwards......................1,230,000
in do. of under £5, never lower than £1, . 2,080,000
..................at £3,310,000



The great and efficient method of preventing the over-issuing of bank notes, and the depreciation of their value, consists in the practice, rigorously adhered to by all the banks, of exchanging each other’s notes twice a week, and paying immediately the balances.  For that purpose, “all the banks of Scotland have agents at Edinburgh, who exchange their notes twice a week, Monday and Friday; .... and the balances (are) paid by short dated bills (ten days) on London.  The state of those balances is looked at by the banks, with the utmost jealousy and attention; .... if any thing in any degree wrong were to appear, the banks would instantly correct it, and force a bank acting improperly to alter its mode of conduct.”  This method is the same which, though with less rigor and uniformity, is successfully used by the allied banks of Boston, and by the Bank of the United States, for preventing excessive issues of paper.

It is asserted, that the whole loss sustained in Scotland by the public, by bank failures, through more than a century, has amounted to no more than £36,344;  and this result seems to be altogether ascribed to the peculiar features briefly noticed in this note.


--------------------------------------------------------------------------------

NOTE C.

RESTRICTIONS ON PRIVATE BANKING.




It is also provided by a law of the State of New-York, (1818,) that “no person, association of persons, or body corporate, except such bodies corporate as are expressly authorized by law, shall keep any office for the purpose of receiving deposits, or discounting notes or bills, or issuing any evidence of debt to be loaned, or put in circulation as money :  nor shall they issue any bills or promissory notes or other evidences of debt as private bankers, for the purpose of loaning them, or putting them in circulation as money, unless thereto specially authorized by law.”

The prohibition to issue any species of paper, that can be put in circulation as money, is perfectly proper, and indeed necessary :  but that of receiving deposits, or discounting notes or bills, must have had some special and temporary object in view, and does certainly require revision.  Why individuals should not be permitted to deposit their money with whom they please, is not understood.  In such cases, interest is generally allowed, and this practice promotes frugality, and should rather be encouraged than for bidden.  So long as credit is deemed essential to commerce, the discounting of notes or bills, by private individuals, creates competition, and is a public benefit.  Incorporated banks cannot conveniently alter, either the rate at which they discount, or the time at which the notes discounted must be paid or renewed.  Private capitalists may and do modify their loans, in both respects, according to the state of the money market, and to the wants of the community.  They will discount at the rate of four or five per cent., when the use of capital is worth no more ;  and, being still controlled by the general law of the land, they never can legally receive more than the legal rate of interest.  And they may, to the great benefit of commerce, discount business notes due at three and six months date.  The advantages, if not the necessity, of this accommodation are such, that it is understood, that the law in question is, in that respect, daily disregarded.  The prohibition alluded to has no other effect, than that of deterring some prudent capitalists from engaging in that business, and of enhancing the premium, which, those who, in order to meet their engagements, negotiate the evidences of debt due to them, must pay for the discount.




--------------------------------------------------------------------------------

* The opinion of the Supreme Court, in the case of M’Culloch vs. State of Maryland, had not been seen by the writer of this essay, when it was committed to the press :  and the important inference, drawn from the use of the words “ absolutely necessary,” in another clause of the Constitution, had escaped his notice.

2 With the exception of the power of receiving private deposits, the object of which provision is not perceived, this is precisely the species of National Bank, which has been suggested in the President’s last message.  The question, whether the purchase of drafts would, as we think, be a charge on the Treasury, or prove, as seems to be expected, a source of profit, is one of secondary importance.  It is sufficient to observe, that the issues of the state banks could not, nor indeed is it anticipated in the message that they would, be checked by this plan.  It would not, therefore, effect the great object contemplated by the Constitution, to carry which into effect is enjoined by that instrument, and for which we principally contend, viz. that of securing a sound and uniform currency.

[lord edward coke]

The Pauper and The Rich Man



The pauper (the Federal Reserve Bank) with assets of $52 billion with no productive know how, and less than 100,000 stockholders, loaned the rich man (The United States Government) with well over $350 billion in physical assets plus $250 billion in productive capacity and know how, with 170 million stockholders, $300 billion to fight World War II.  Can you imagine the greatest corporation on earth, with 170 million stockholders and assets running over $600 billion, turning to a corporation with less than 100,000 stockholders and assets of only $52 billion to borrow money?  Can you imagine Rockefeller saying to his chauffer:  “Tom, I am transferring my personal chequeing account, which is around $1 billion, to your account; you may spend it as you please, provided that when I need some cash, you will hand it to me.  Of course, I will give you my note for cash I receive and pay interest on the note.”  Well, that is exactly what Congress did in 1913 when it passed the Reserve Act.  To fight World War II, we gave the bankers of the United States $300 billion in U.S. Bonds that we might use the Nation's credit.  In addition, we permitted them to take a credit of $300 billion in their reserve accounts.  This gave them $2 trillion 100 billion bank credit.  These credits are to bankers what your deposit credits on their books are to you.  They can lend it, or buy investment obligations-it is cash to them!  So adding the $300 billion in Bonds to their bank credit, we find that the bankers (the then paupers) came out of World War II $2 trillion 400 billion richer than when we went into the War.  The United States Government (the then rich man), thanks to the stupidity and venality of her sons (congressmen), and newspapers and journals, came out of the War $300 billion in debt!  And, dear reader, that fable happens to be true.

http://web.archive.org/web/20031208000945/http://yamaguchy.netfirms.com/

[trailhound]

Nice thread.

[planning4acrash]

Mr "Freedom", you loose the point. If I am free, I should not be FORCED, COERCED into using depreciating paper.

Yes, govt could print money without interest BUT, whenever govt did that they abused the power and investors lost confidence so, they decided to partner with private central banks, to provide them legitimacy.

So, I have no problem govt or central banks printing money. What I want is to end legal tender laws that stop me earning and paying in sound money. I don't seek ANYTHING but freedom to choose and the absence of force and coercion.

This is a MORAL issue, that has nothing to do with your reasoning, because free people should be free to choose good and bad currencies and investments and should be free to make their own assessments and judgements. So, you keep your judgement, I'll keep mine.

[lord edward coke]

Nice thread.

When asked “Who is the ‘father’ of modern economics?” most economists answer Adam Smith (A.D. 1723-1790). Smith was a Scottish “moral philosopher,” pioneer of political economics, and author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations (A.D. 1776)—the first modern work of economics.  (Note Smith’s fixation on “morality”.  He was a “moral philosopher” and his first book involved “Moral Sentiments”.)

Smith was the quintessential “absent minded professor”.  He was fumbling, forgetful and inoffensive—but highly intellectual.  Alan Greenspan described The Wealth of Nations as “one of the great achievements in human intellectual history”.

Although Smith is widely cited as the “father of modern economics,” I suspect that someone far less “moral” is the true “father” of modern economics.  Smith may be the “father of economics”.  He is certainly the “father of classical economics”.   But, as you’ll read,  the true “father of modern (monetary) economics” is someone far less moral than Smith.


Smith’s Morality

Smith entered the University of Glasgow at age fourteen to study “moral philosophy”.  At that University, Smith developed a passion for liberty, reason, and free speech.  In 1748, as an Edinburgh university professor, Smith first expounded his economic philosophy of “the obvious and simple system of natural liberty.”

Smith was raised as a Christian, but reportedly became a deist (one who believes that a supreme being created the universe, and that this fact and other religious truths can be deduced by using reason and observation of the natural world alone, without need for faith or organized religion.)  Smith’s religious and moral inclinations are important in that they suggest that Smith’s economic theories were built on a “moral” rather than purely “monetary” foundation.

In his first published his first work (The Theory of Moral Sentiments; A.D. 1759) Smith first referred to his famous “invisible hand” to describe the apparent benefits to society when people behaved in their own interests. In the book, Smith critically examined the moral thinking of his time, and suggested that conscience arises from social relationships.  Smith proposed a theory of sympathy, in which the act of observing others made people aware of themselves and the morality of their own behavior. Again, in Smith’s proposed “sympathy,” we see evidence of Smith’s focus on morality.

I contend that Smith’s notions of morality colored the economic theories he advanced in his later work The Wealth of Nations.  In that second book, Smith claimed that the free market, while appearing chaotic and unrestrained, is actually “guided” to produce the right amount and variety of goods by a so-called “invisible hand”.  Smith opposed any form of economic concentration or regulation because he believed that it distorted the market’s natural ability to establish a price that provides a reasonable return on land, labor, and capital.  Smith advanced the idea that a true free market economy would produce a satisfactory outcome for both buyers and sellers, and would optimally allocate society’s resources.

According to Smith, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

Smith believed that when an individual pursued his own self-interest, he indirectly promoted the good of society.   Smith argued that self-interested competition in the free market tended to benefit society as a whole by keeping prices low, while still building an incentive for a wide variety of goods and services. Nevertheless, Smith was wary of businessmen and argued against monopolies.

Smith was an early proponent of free markets, limited government and he based his economic theories primarily on human morality.

For all of that, Adam Smith is truly the “father of classical economics”.

Classical (Moral) Economics Gives Way to Modern (Monetary/Immoral) Economics

Smith may be the father of classical (moral) economics, but he is not the father of modern “monetary” (immoral) economics.  Modern economic theory has no “moral” foundation other than “greed is good”.  The classical notions of moral right and wrong that animated Smith and classical economics have been replaced by a “modern economic theory” wherein “right and wrong” have been supplanted by “profit and loss”.

In modern economic theory, that which makes a profit is “good” and that which loses money is “bad”.  The subtleties and humanities of mankind’s morality have been abandoned for the stark simplicity of mathematical calculations.  Today, it’s simple.  It’s all about the money.  Mo’ money, mo’ money, “SHOW ME THE MONEY!” constitutes the essence of modern, monetary economics.  Is your business in the “red” (bad) or in the “black” (good)?  The mathematical “bottom line” of modern economics has replaced the “moral values” of classical economics.

Our world is not improved by that change.

Where Smith advocated a “free market” wherein each individual’s “self-interest” would result in “benefit” to all, our current markets are manipulated and their “benefits” are primarily reserved for a few “insiders” rather than the nation at large.  Smith advocated “natural liberty”; today’s economics push for debtor bondage.  Smith’s classical (moral) economics promoted The Wealth of Nations; today’s monetary economics promotes The Wealth of Special Interests (or perhaps, The Wealth of Bankers).

The Father of Modern, Monetary Economics

1st Timothy 6:10 declares “For the love of money is the root of all evil . . . .”  Note that the Bible never declares “money” to be evil.  It’s the love of money that we’re warned against.

Money, itself, is not bad.   Money is necessary, common to virtually all cultures, and important to operating a complex nation.  Money is morally neutral.  It’s the love of money that tends to immorality.  It’s the love of money that gives rise to prostitution, hit men, and the insatiable greed of some corporate executives and politicians.

If you want to find the “father” of today’s monetary economics, I suggest you look back in history for the man who most loved money.

I suggest that man was Mayer Amschel Rothschild (A.D. 1743-1812), the founder of the Rothschild fortune and dynasty that controls much of the world’s economy to this day.  Mayer Rothschild is famous not only for his wealth, but for his primary ambition in A.D. 1790:

“Give me control of a nation’s money and I care not who makes her laws.”

I doubt that you can find a clearer expression of the love of money than Rothschild’s hope and dream that if he could control a nation’s money supply, then the lawmakers (both human and divine) would become irrelevant.  In Rothschild’s view, money is the real “god” of this world.

Rothschild’s “give me control” statement laid the intellectual foundation for modern, monetary economics.

The Apple Doesn’t Fall Far From the Tree

In A.D. 1815, twenty-five years after Mayer Rothschild expressed his dream to control a nation’s money supply, his son Nathan reaffirmed his father’s (and family’s) love for money when he declared:

“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply.”

The patriarch’s dream of controlling England’s money supply had been achieved.  His son Nathan “cared not” who ruled England as sovereign because Nathan “controlled the British money supply.”  As a result, Nathan was now so rich that he believed himself to be “above the law” of man or God. And Nathan was certain that by controlling the money supply, he and the Rothschild family would accumulate even more wealth and power.

The Rothschild’s claimed to control England.  But England was not the only nation that had a money supply to control. Each of the world’s nations had its own money supply, and the Rothschild family determined to one day control them all.

For example, it’s alleged that in A.D. 1791, through Alexander Hamilton, the Rothschilds established a central bank in the USA called the First Bank of the United States.  When Congress voted in A.D. 1811 against renewing that bank’s 20-year charter, Nathan Rothschild warned, “Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war.”

The following year, England declared war against the USA in “The War of 1812.”  It’s alleged that the Rothschilds planned to cause the US to build up such an enormous debt in fighting this war that the US would have to surrender to the Rothschilds and allow a new US central bank to be chartered.  If so, we can see the beginnings of an economic and even global system dedicated to “endless war for endless debt.”  (Incidentally, before she died in A.D. 1849, Mayer Amschel Rothschild’s wife “Gutle” nonchalantly remarked, “If my sons did not want wars, there would be none.”)

In A.D. 1815, as England’s Wellington faced Napoleon at Waterloo, the five Rothschild brothers reportedly supplied gold to both armies.  As condition for Rothschild loans, the warring armies had to agree to honor the debts of the vanquished.  I.e., if Napoleon won, he’d pay whatever England owed to the Rothschilds.  If Wellington won, England would pay whatever Napoleon owed to the Rothschilds.  This began the Rothschild policy of funding both sides in wars in order to generate massive, risk-free debt.  It didn’t matter which country lost the war because the Rothschild loans were given only on the guarantee that the victor would honor the Rothschild debts of the vanquished.

Pretty slick, hmm?  Heads, Rothschild creditors win; tails, Rothschild debtors, lose.  With this formula, Rothschilds were sure to win every war.  You can see why Rothschilds would favor and even cause wars.

By means of having great wealth, the Rothschilds were able to acquire even more wealth and power.  Some estimate that in the early 1800s, the Rothschild family controlled over half the wealth of the western world.

In A.D. 1816, the US Congress rethought its position on having a central bank, and passed a bill permitting yet another Rothschild-dominated central bank, which again gave Rothschilds significant control of the American money supply.  But Andrew Jackson (running on the slogan “Jackson And No Bank!”) was elected 7th President in A.D. 1829.  Jackson planned to take the control of the American money system to benefit the American people rather than allow the Rothschilds’ profiteering.  Jackson succeeded in “killing” America’s 2nd Central Bank.

Once removed by Jackson, the Rothschilds did not return in force to the US until A.D. 1913 when they established our 3rd central bank:  The Federal Reserve that we all so know and love today.

In fact, this is the same Federal Reserve that is currently “saving” our country (or at least our country’s bankers) from an economic recession/depression.  And how is the Federal Reserve “saving” us?  Under the fearless leadership of “Helicopter” Ben Bernanke, the Fed has been flooding the country with paper, fiat dollars.

In other words, by “controlling the supply of money” (exactly the formula advocated by Mayer Rothschild in A.D. 1790), our Federal Reserve proposes to solve our current economic crisis.  The Fed does not see our current economic crises as a result of a loss of national moral values (of the sort Adam Smith advocated).  Instead, operating under the Quantity Theory of Money, the Fed is attempting to prop up the economy with yet another monetary “fix” of the sort that held us together through a number of economic downturns in the 1980s and 1990s.
today’s predominant economic theory can be traced back to Mayer Amschel Rothschild’s 1790 declaration that “Give me control of a nation’s money and I care not who makes her laws.”

Therefore, I contend that the true father of modern economic theory is not Adam Smith but Mayer Amschel Rothschild.

It’s interesting that Smith and Rothschild were contemporaries.  Smith published The Wealth of Nations in A.D. 1776 (the same year as our “Declaration of Independence”).  Rothschild declared his love of money and intent to “control a nation’s money” just fourteen years later in A.D. 1790.  Smith advocated a theory of economics that was based on moral values and was intended benefit a “Nation”.  Rothschild advocated an immoral economic principle that was intended to benefit, enrich and empower only the “special interests” of the Rothschild family.  Initially, Smith’s theory seemed predominant, but eventually (and currently) the Rothschild theory of modern, monetary economics (control the money supply) rules.

If we had adhered to morally-sound economic theories (like Smith’s), our nation would have continued to prosper with benefits and blessings for all.  But—because we’ve embraced the Rothschilds’ theory of economics, we have lost national prosperity, we are the biggest debtor nation the world, and we’re headed for economic and social catastrophe.

If the Bible is true and the “love of money” is the root of all evil, then by embracing a purely monetary (but immoral) theory of economics (based on the Rothschilds’ “love of money”) we shouldn’t be surprised if the result is something very unpleasant.

The true “father” of our modern, monetary-based economy theory is not the moral Adam Smith—it’s money-lover Mayer Amschel Rothschild.


Punch line:  In A.D. 1790, virtually every nation had its own money supply.  Today, there are only five remaining nations without a Rothschild-controlled central bank: Iran; North Korea; Sudan; Cuba; and Libya.  There had been a sixth—Iraq—but their central bank’s independence ended with our A.D. 2003 invasion.

http://adask.wordpress.com/2010/06/18/vt-ntm/#more-757

[lord edward coke]

http://www.amazon.com/s/ref=ntt_athr_dp_sr_1?_encoding=UTF8&sort=relevancerank&search-alias=books&field-author=Edwin%20Vieira%20Jr.

Transcript of Dr. Edwin Vieira's Presentation at the National Press Club, June 29, 2000

[Bob Schulz introduction] Dr. Edwin Vieira is a graduate of Harvard College, the Harvard Graduate School of Arts & Sciences and Harvard Law School. He is an attorney specializing in constitutional law; he is the author of Pieces of Eight, the Monetary Powers and Disabilities of the United States Constitution, published in 1983, and a revised version of Pieces of Eight is scheduled for publication later this year. Let's welcome Dr. Edwin Vieira.

(Dr. Vieira) Thank you, Bob, ladies and gentlemen. My pleasure to be here. I'm billed, on your program, with talking about the money issue. But I've been talking about the money issue and writing about the money issue for so long that I'm thoroughly bored with it. And when this book, this revised book comes out, if you pick that up at the library, if I can somehow wangle libraries into putting it on their shelves, and you read it, you'll be mightily bored with the issue too.

http://www.citizensforaconstitutionalrepublic.com/Dr._Edwin_Vieira,_Jr..html
So, I'm not going to talk about that, I'm going to talk, in general, about some of the problems that I see from a constitutionalist's perspective with the "16th Amendment" and the wonderful work that Bill Benson has done, and that Larry Becraft and others have followed up on.

Now, one of the things, though, that I would like to raise as an issue, for your consideration, is a peculiarity that I see between the two subject matters; one, the money issue, the Federal Reserve, if you will, on the one hand, and the income tax on the other hand. I've studied the money issue, case law, statutory law, historical descriptions of what went on, from, I don't know, the Middle 1600's in England up until now. And one of the things you discover, or at least I have discovered, going through all of that, is that the powers that be, very systematically changed the laws as they went along, or they wrote the court opinions in such a way as to rationalize, perhaps not justify, but at least to rationalize, what they were doing.

So you can see a kind of logical progression or degeneration in the statutory and case law from the early days, from the Constitution, from 1789, up until the present time. And they really didn't hide any of this. It's there if you're willing to look. Fascinating thing is, most people aren't willing to look. But, it's not a deep, dark secret.

Whereas, in the area of the income tax, there seems to be, at least to my mind, an anomaly. That is, if I were in charge, politically, of this system, and I had a vast mass of people out there believing that they had to pay these taxes and they had to file these forms and keep these records and perform all of these various functions, even if I knew that the "16th Amendment" hadn't been ratified or that there was some other basic constitutional flaws in what I was doing, it really wouldn't bother me too much, to write the tax statutes and regulations consistently with what the masses of people thought those statutes and regulations said. Why would I care? It's all a con game anyway, right? I'm lying left and right. I can lie in this statute as well I lie in that statute. What difference does it make? Why would I not write the tax code and the tax regulations in the way everybody believes the tax code and the tax regulations are already written?

And I leave that with you, because I think that's a fascinating psychological problem.

The more interesting psychological problem, and I think it's a problem also of political philosophy, that I want to talk about today, is why we are even bothering to be here. Why Bill Benson had to bother, trudging all over the country, to collect those, what, 17,000, plus or minus -- probably plus, probably a low estimate -- 17,000 certified pages of public records. It seems to me that, if we're all not embarked on a kind of fool's errand, that, certainly, this group has undertaken a task that, in any kind of free and rational society, it should never have been called upon to start, and certainly shouldn't have to complete.

None of the business that the various speakers this morning have laid on the table before you folks, would be necessary, if all of those foxes in charge of the henhouse in Washington and the state capitols, all of those years since 1913, had been acting according to their legal duties, instead of behaving according to their political natures. Now, I know, just as everyone else here, that I really swoon with patriotic ardor, and swell with party pride, when I hear the revered names of our leaders, past and present.

Nevertheless, it seems to me, that the conclusion to which I come, from history, at least, is that all of them, to the last man and woman, minus one or two exceptions, haven't done their duty, they're not doing their duty, they have no intention of doing their duty, and no reality, no piling up of petitions, or pleas or kowtowing or begging, will ever cause them to do their duty, or to accomplish anything other than aiding their critics to establish a record of their willful and persistent derelictions of duty. Now, some of you may blanch at that, the severity and the sweep of this indictment, for lawyers are good at making indictments. But, I'll let you be the judges.

Now, I just should backtrack once, because I always tell some kind of a story about lawyers, being one, for my sins.

Plane goes down, in the Caribbean. Three survivors. Dr. Kildare, Lawyer Mouthpiece, and Father O'Flaherty. And they swim to this little island. Get there, they're completely dog tired. And there's nothing, just sand and rock. But, across a little lagoon, there's another island, and it has palm trees, and, apparently, fresh water. Well, they have to get to it. And they see that one of the rafts from the plane has washed up on that island. Now that ... but they're too tired to swim, so they say "One of us has got to go and get that raft." But the water is full of sharks. Well, Dr. Kildare, he's really the strongest of the three, says "I'll go." The other two say, "No, Doctor, no, you know if things come, bad comes to worse, we're going to need you." Father O'Flaherty says "Well, it's really my responsibility, my sons, I'll go." They say, "No, Father, if things really come worse to worse, we may need you even more than Dr. Kildare." So that leaves, of course, the lawyer. Nobody can figure out a reason why he shouldn't go. So, he goes off and plunges into the water, and all of a sudden, instead of devouring him, the tiger sharks line up and form a bridge and he can actually walk right across to the other side. And Father O'Flaherty looks at Dr. Kildare and says, "It's a miracle, a miracle." And Dr. Kildare turns back and says, "No, just professional courtesy." (Audience laughter and applause.)

Well, let me be a little shark-like in terms of analyzing this situation, historically. You know, with all deference to Bill, the question of the invalidity of the "16th Amendment" wasn't broached yesterday, it wasn't even broached in 1985, really. Because all of the primary evidence has been a matter of public record since 1913. 1913, until the early 1980's, well before Bill Benson and Red Beckman ever started out on their trek, it was there. Now, Bill published that book, The Law That Never Was, 1985, (Bill, in background saying "April 4th") okay, April 4th, 1985, 15 years ago. The evidence that was catalogued and reproduced in The Law That Never Was was filed and the argument against the "16th Amendment" was presented in numerous Federal court income tax cases, or at least they tried to present it. I remember one of those was in Kalamazoo, Michigan. I was there testifying on another subject, on the money issue. Bill was there, Larry Becraft was there, and there was Judge Enslen, who was the ringmaster in that little circus. And what was interesting in that case, just as an aside, they were so afraid of having the money issue, forget the "16th Amendment", they were so afraid of having the money issue presented to the jury, that they had to have my testimony off the record, at night, in the court house, with no one present, other than the lawyers, and the court clerk and the judge, and the poor witness. That was Judge Enslen. Fine example.

Bill Benson and Larry Becraft, as I understand, sent copies of The Law That Never Was to every member of Congress. (In the background, Bill said "I did.") You did, okay, and that was when, the middle 1980's? (Bill in background "'87, and their names were embossed on the bottom of the book in gold, just like the book is [couldn't understand Bill's last word here]") Okay, 1980, 1987. And subsequently, and even to this very day, the charge that the "16th Amendment" is invalid has appeared in all sorts of publications, and you can find it spread in the global village on the Internet. People in Bangladesh know this. Alright. And of course, very recently, this group, Bob Schulz, presented the issue to the White House, right, with the results that you all know. But nothing has been done, in all these years, by all of these people in authority. And, there is the interesting question, "Why not?".

Well, to answer that question, I think you first have to investigate how these people have shirked their duties and failed their country, and, if Shakespeare's ghost will forgive me, I would ask the question, "How do I fault thee? Let me count the ways."

First, the judiciary. Ah, the judiciary. The inferior Federal courts, I'm not saying that to be derogatory, that's the constitutional term, right? The inferior courts ... say that the invalidity of the "16th Amendment" raises a "political question" which is not justiciable, but belongs exclusively to Congress. Well, that's rather a highly questionable, you know, or even question-begging conclusion. As many as you probably know, the term "political question", or even any words or phrases that intimate that kind of a doctrine, do not appear in the Constitution. The doctrine of political questions is another of those rather imaginative patterns that the courts have cut from whole cloth in order to avoid being confronted with issues that they would rather not hear.

Now, in some very narrow context, that idea may serve a practical purpose. But in this particular context, it makes no sense at all. If you recall, the theory of judicial review, which is the basis for the Supreme Court and the other courts deciding on the constitutional questions of statutes that come before them, that was first excogitated in the case of Marbury v. Madison by John Marshall, long, long, ago [5 U.S. 137, 173, 176 (1803)], and it says that because of their oaths or affirmations of office to support this Constitution, in any case or controversy that comes before the judges, they must put the Constitution ahead of any mere statute or other action by public officials.

So, no matter what Congress or the President or the States may say some provision of the Constitution means to them, the judges must decide the matter for themselves. In fact, they have a saying, which is attributed usually to Chief Justice Charles Evans Hughes that encapsulates this sort of unbridled power that they have: "The Constitution is what the judges say it is." Well, of course, that's nonsense! But let's take them at their word, and see where that leads. If the judges' oaths or affirmations require them to decide for themselves what some provision of the Constitution means, why then do those same oaths or affirmations not equally compel them to decide the even more consequential matter of whether some alleged provision of the Constitution actually exists? Alright? Existence usually precedes meaning, one would hope. No matter what Congress or the Secretary of State or the President or the States may say, or not say.

Are we supposed to believe that this doctrine of judicial review is so inconsistent in its logic, and so porous in its coverage, that, on the one hand, the courts will not suffer Congress, the President or the States, to make the least little mistake about some provision or amendment of the Constitution, what those mean, let alone to lie about it? But, on the other hand, the courts will allow Congress, the Secretary of the State, the President, the States, whomever, to lie or to make glaring mistakes about whether a particular amendment actually exists? -- is rather implausible theory.

Are we further to believe that the courts will not allow Congress to lie or to make a glaring mistake about whether an Amendment actually exists, but then will also suffer themselves to be perverted as willing tools to convict, fine, or incarcerate people, who, if the Amendment doesn't exist, are innocent of any crime? That strikes me as even less likely.

Now, it's possible that judges with straight faces, and maybe quiet consciences, might refuse to hear the argument that the "16th Amendment" was not validly ratified. If Congress, the Secretary of State, the President, and the States that supposedly ratified the Amendment, had all affirmatively passed on that question in light of the evidence that has now been exposed through Bill Benson's work. But as every judge in this country knows, neither Congress, nor the Secretary of State, nor the President, nor any of the States that supposedly ratified that Amendment, have, in fact, passed on the deficiencies that Bill has cataloged. And these deficiencies quite glaringly show that the Secretary of State and the state legislatures that supposedly ratified the Amendment knew, or should have known, from the very beginning, that those ratifications were highly questionable. But they did nothing.

So, it strikes me that no judge can honestly say that this is a matter that Congress or other political branches of the government, national or state, have somehow put to rest. Neither can any judge say that this is a matter that only Congress can or should put to rest. Or at least no judge can say this, when a defendant stands before him charged with some criminal violation of a statute, the validity of which depends on the existence of the Amendment. Self-evidently, if Congress, the Secretary of State, the President, and the States, refuse to come to grips with the issue, the obligation to decide the invalidity of the "16th Amendment" necessarily falls back on each individual judge, in each case that comes before him, perforce of Marbury v. Madison. Their own Supreme Court is telling them to do this.

Now, whether the ratification of the "16th Amendment" arose out of a fraud perpetrated by Philander Knox, at least in my view, is not the controlling issue in this kind of analysis. Although, obviously, a charge of fraud renders the matter that much more serious. The Amendment would be unconstitutional even if Knox's certification of its supposed ratification, had resulted from his merely honest stupidity, insouciance, or blunders. Either the Amendment was ratified in the form required by law in 1913, or it was not. If it was not so ratified, it did not then become, and is not now, and cannot be, part of the Constitution, no matter how many mistakes office holders may have made in good faith in saying the opposite.

We the People's lives, liberty, and property cannot be held hostage to our representative's negligence. And any judicial doctrine that holds otherwise, is itself such a [sound interrupted for approximately 7 seconds ]. But I don't believe an honest mistake explains why judges so readily employ their doctrine of political questions. [sound interrupted for 13 seconds] alleged Amendment, and its invalidity would be a political question if it dealt, not with the income tax, which is a cornerstone of the modern administrative state, but with some other matter that threatened the establishment's power.

Imagine, for instance, that for ... as they used to say in Camelot, a single shining moment occurred, and We the People actually gained control of Congress and the state Legislatures and pushed through a new amendment. A new patriotic amendment, that cut back on the, for instance, the judiciary's wild misinterpretations of the First Amendment. An amendment that allowed states and localities to ban pornographic writings, theatrical performances, movies, lewd displays, whatever. I don't have to specify any more. All the elements of the sexually degenerate cutting edge of the cultural revolution that the Establishment is waging against this country. Would the courts interpose the doctrine of political questions to prevent the peddlers of smut from stripping that Amendment of its validity if they had the evidence that Bill Benson produced against the "16th Amendment"?

Or imagine that this new Amendment allowed or even required the states to ban abortion. Uh! God forbid! Would the courts energize the doctrine of political questions to suction the abortions out of the courtroom doors?

Or imagine this new Amendment prohibited the national government from owning any wilderness areas, parks, or other lands or facilities, other than those specified in Article I, Section 8, Clause 17, of the Constitution, and required the government to sell what it holds to the private sector. Would the courts snarl at the radical environmentalists to stop badgering the judges and instead hunt for relief from Congress?

Or imagine that this Amendment reaffirms, in utterly clear terms, that the Second Amendment absolutely guarantees and protects the private ownership of all types of firearms suitable for people's militia, from handguns to fully automatic rifles and submachine guns. Would the courts unholster the doctrine of political questions to shoot down the lawsuits of the gun control fanatics? Would Rosie O'Donnell be told to go to Congress, or some other place where she ought to go? [Audience laughter and applause]

Could anyone here believe for one minute, for one second, that in each of these situations, the Establishment's courts would not leap into the legal fray and declare any of these supposed Amendments invalid, notwithstanding all the arguments about political questions that the proponents of the Amendments might make? Well, I leave that you, that's rather self-evident.

Now, let's look at the Department of Justice, so-called. If judges are responsible for whatever injustices are being perpetrated under the "16th Amendment" because the courts serve as the venues for prosecutions, certain people of the Department of Justice, perhaps are even more culpable, because they bring those prosecutions in the first instance. Now, doubtlessly, the government attorneys involved in the initial cases in which was introduced evidence from The Law That Never Was, reported all of this back to their superiors. Then what did they, their colleagues, and their superiors do? Well, there's a division in the Department of Justice that decides whether or not to pursue each and every income tax prosecution, at least that used to be the law. In making those decisions in the cases that followed publication of The Law That Never Was, did the responsible officials or the prosecuting attorneys or anyone else in that bureaucratic rabbit warren investigate the invalidity of the "16th Amendment"? Did the Attorney General, who is ultimately responsible for everything that transpires in the Department of Justice, do anything?

If they did, what did they do? What did they discover? What did they determine? If it was that the "16th Amendment" was validly ratified, why has someone at the Department of Justice not communicated this conclusion in eighteen point type to the American people, so the matter could finally be closed? What would cause the people in that department to keep such a congenial conclusion secret? Surely not their personal self-interests, or the self-interests of the political machinery in which they are the cogs. On the other hand, if they did not investigate, why not? Did they act then? Are they acting now, in reckless disregard of what an investigation would prove? Well now, you know most of these machinskies are attorneys. They're members of the bar, and officers of the courts. As such, they have certain ethical -- believe it or not -- they have certain ethical obligations, in addition to the legal responsibilities that their bureaucratic positions impose on them.

Now, those of you who are attorneys or might have had the misfortune to deal with attorneys, should ponder the following little scenario that I've drawn up, and the questions that might be used at what we lawyers call "a continuing legal education seminar on lawyers' ethics." And here's the scenario: Attorney Shyster represents a major corporation that has a number of lawsuits being threatened and prosecuted against it. During the first of these cases that goes to trial, the CEO of Shyster's client provides him with a document that, the CEO says, will win the case. Well, dutifully Shyster introduces the document as evidence. Over the opposing party's objection, Judge Goofball accepts it. On the basis of this evidence, Shyster's client prevails. Later, information comes to Shyster showing that the supposed evidence is, or very well may be, in fact, false, and perhaps even fraudulent.

Question. Does Shyster have an ethical obligation to investigate the matter?

Question. Until that investigation is completed, has been completed, may Shyster ethically introduce the document in other trials, simply because Judge Goofball was possibly deceived in the first trial by Shyster himself?

Question. What if the CEO of Shyster's client orders Shyster not to investigate, but to cover up the whole matter, and to continue to use the phony evidence in other trials? Should Shyster refuse or merely raise his fee? [Audience laughter]

Question. Would your answer to the preceding question be different if the CEO also promises to use his political influence to see that Shyster is appointed to a Federal judgeship?

Well, one need not be an expert in legal ethics or even a lawyer to know how to answer these questions, especially the last one. But the question is really, which way should they be answered?

Well now, let's take a look at Congress. Congress's responsibility for this state of affairs is multi-fold.

Number one. Congress originally accepted Philander Knox's certification that the "16th Amendment" had been validly ratified, without, as far as we know, any legislative investigation of the accuracy or good-faith of his certification. Correct? Didn't even look at it! Well if this was culpable negligence, at that time, is open to debate. No longer arguable is that such uncritical acceptance today sinks to a level far below mere negligence.

Second. Based on its original uncritical acceptance of the "16th Amendment", since 1913 Congress has enacted numerous income tax statutes and licensed the IRS to promulgate countless regulations under color of which trillions of dollars of wealth have been extracted from the American people, and who can say how many individuals have been fined, imprisoned, or otherwise penalized and punished for violating various code provisions or regulations. This looting and persecution continues unabated, not only within Congress's view, and not only to its financial benefit, but also with its acquiescence, approval, and no less than aid and comfort.

For point three, Congress has always enjoined the constitutional power, and faced with the documentation that the "16th Amendment" was not lawfully ratified, has the constitutional duty to initiate an inquiry into the legal basis for the present income tax statutes and regulations. It doesn't need Bill Benson to petition it. Doesn't need this group of people to meet here. It's always had that responsibility and that power. And not in some vaguely theoretical way either. Because court after court, in the last few years, has actually held, not merely suggested, that whether the "16th Amendment" was validly ratified, is a political question for Congress alone to decide. So the judiciary has officially dumped this issue in the Legislature's lap. And every American knows how punctilious and scrupulous Congress is in following judicial decisions.

Which brings me to point four. If Congress would've determined that officials in the Judicial and Executive branches of the government have convicted and imprisoned innocent individuals under color of tax statutes, notwithstanding that those officials were on notice, and knew, or should have known, of the invalidity of the "16th Amendment", then it seems that Congress would be at least morally required to impeach and remove from office each and every one of those officials, preliminary to the imposition of more drastic punishments.

Well, Congress has done none of those things either. That brings us to the Secretary of State. Now the present Secretary of State ... and I should backtrack one step. The law has changed. The Secretary of State no longer certifies the ratification of constitutional amendments. But, in this particular case, I believe the present Secretary of State, the sitting Secretary of State, retains responsibility because her predecessor, Philander Knox, certified the "16th Amendment" had been validly ratified. And if Knox's act under color of his position of Secretary was erroneous, or worse yet, fraudulent, it would appear legally incumbent, as well as morally compulsive, upon Knox's successor in office, to correct the error or expose the fraud, because that really was an error of the Department of State. Of course, nothing's being done there now, the present Secretary of State is more interested in bombing wogs and fuzzy wuzzys in foreign countries than in dealing with issues of freedom of the American people.

Well, that brings us to the President, or as they like to say, this President [audience laughter], to distinguish him from all the other Presidents [more laughter], for whatever reason may strike your fancy, this President.

On entering his office, even this President swore or affirmed that he, quote "will, to the best of his ability, preserve, protect, and defend the Constitution of the United States," and it may be true that he's doing it to the best of his ability [audience laughter and applause]. Because if Congress won't call him a perjurer, I certainly don't want to. And among this President's duties is the requirement that, quote, "he shall take care that the laws be faithfully executed." No doubt depending on what he thinks "faithfully" means [audience laughter], because we know how he interprets that word in other contexts [more laughter].

How can anyone fulfill these mandates who does not know, or worse yet, does not care, what the Constitution actually prescribes? So, now that the President does know, along with everyone else in the global village, for which we can thank Al Gore, right? [audience laughter]. As long as he knows that the ratification of the "16th Amendment" may have been false or fraudulent, his duties should be diligently to inquire into the matter so that he could be sure of what the laws are, that he must take care to faithfully execute. And while the investigation proceeds, he could also order the Department of Justice not to prosecute any more criminal income tax cases, let them be put on hold, for heaven's sakes. And he could even pardon those people who were convicted while the courts and everyone else in positions of authority in the Federal apparatus refused to address this issue. He could, but he isn't, and he hasn't, and he won't.

Well, that brings us to the states. Glory be, the 10th Amendment, the states. The states that claimed to Secretary of State Knox that they had ratified the "16th Amendment" obviously share an especially weighty responsibility for everything that has transpired since 1913. Partly because they, perhaps more than anyone else, are, or should be, aware of the many manifest and arguably fatal deficiencies of their supposed ratifications. So now that this question has been squarely presented, the Legislatures of those states should conduct their own investigations into the sufficiency of their ratifications. And perhaps their courts should entertain lawsuits to test that sufficiency. Moreover, what about those three solitary states, the three musketeers of constitutionalism, that refused to ratify the 16th Amendment? Connecticut, the Constitution state. Rhode Island, where they had the first incendiary tax protest, they burned the Gatsby, British tax schooner. And Utah. Those states could bring an action in the original jurisdiction of the Supreme Court, attacking the faulty ratification of the Amendment. And this would have the inestimable value of forcing the "gang of nine" to take a public position, that they will obviously never do because they will always deny writs of certiorari in any of these tax cases that come up through the lower courts.

So, in sum, much could be done by many doers with legal and moral responsibility for doing something, who all have some power to do it. But, in fact, nothing has been done by the Judiciary, except to dodge the issue as a "political question". And nothing has been done in any way, shape, or form, by Congress, the Department of Justice, Secretary of the State, the President, or the states. Now were this a matter, not of constitutional law, which is one of my areas of interest, but of labor law, which is another of my areas of interest, I might draw the conclusion that I would have to identify all of these political deadbeats as charter members of Local Number One of the Shirkers, Snivelers, Shovel-Leaners, and Standers-By International Union [audience laughter and applause]. Any of you who have teen-age or near teen-age children know about that union because I think children sign up for that at birth, alright. Try to get them to do anything around the house.

Or, if this were a matter of criminal law, which in the fulness of time it may yet become, the conclusion would be that as government officials, these people knowingly, intentionally and wilfully have enforced an arguably invalid Amendment with reckless disregard of its invalidity and therefore should be held criminally liable as violators of American civil rights [audience applause]. Title 18, United States Code, section 241, seems to have been written with them in mind. Perhaps more interestingly, though, to me at least, is to view this spectacle through the lense of political science, or political philosophy. I don't think this is much a matter of legal craft as it is of soul craft, if you know my meaning.

The failure to act on the part of all of these individuals in high office for so many decades, and especially during the last fifteen years, during which they have been on repeated notice of the documentation compiled in The Law That Never Was, must have had some reason other than mere sloth. For, according to their own press releases, and their political propaganda, these people are the very best and the brightest of all Americans. They are uniquely qualified by their intellects, their experiences, their motivations, their qualities of leadership, ad nauseam, to fill the highest offices of the land. That's why they run for office, for heaven's sakes! And surely, political psychology tells us that the most plausible reason for the inactivity of such men and women must be their own self-interest, which, no doubt, they know better than anything else.

Now, the American people must ask themselves, "What is the self-interest of political officials sworn to support this Constitution, to preserve and protect the Constitution, to take care that the laws be faithfully executed, what is the self-interest of those individuals who would maintain this country in subservience to an 'income tax amendment' they know, should know, and have every good reason to know, was never ratified, and is therefore not part of the Constitution, and not a law, to be faithfully executed or even to be executed in any way, shape or form?"

Clearly, it is not the self-interest of true and honest agents of average American men and women. For in no rational sense could such deceitful and disloyal officials, behaving in such a lawless manner, be considered the people's representatives. Then who or what have they been representing all of these years? And more to the present purpose, who or what are they representing now?

Realistic political science teaches that there are two, and only two, kinds of government. One, is what the ancient Romans called, a res publica, a "public thing", a government for the people. Not necessarily a democracy, because ancient Rome was not a democracy. And not necessarily a republic, because the ancient Romans from time to time appointed dictators, with good reason. And one can even imagine an aristocracy or a monarchy that would put the public interest, the general welfare, the common good of every citizen, ahead of all narrow special interests. Well that's one form of government.

The other is a government of, by, and for a self-selected, self-perpetuating, crew of elitists. This is not a res publica, a public thing. It is La Cosa Nostra, "our thing." [audience laughter and applause]. That is, gangster government. And such is precisely the nature of what passes for the government today in Washington. And in the states, and the counties, and the cities. It's just a different "family", depending on where you are.

This explains what is going on with the "16th Amendment" far better than any legal mumbo jumbo such as the doctrine of "political questions". America's gangster government does not give a rotten fig what the law actually is. Because law is just a camouflage, or a cover story, for the gang's looting and oppression of the rest of society [audience applause]. America's gangster government operates under what it's legal mouthpieces called a "living Constitution." That is, a Constitution, the meaning of which depends on the interests of the big shots who happen to be living [audience laughter], and who pull the legislative and judicial strings.

So, America's gangster government can function perfectly well under Constitutional Amendments that were never ratified. Because whether an amendment was ratified is far less important than whether it can be enforced. And I remind you of the wisdom ... the man was not a Sicilian, he was a Neopolitan, but he had tremendous wisdom in this area ... Alphonse Capone, one of the great political philosophers in American history [audience laughter]. He said "You can go a long way in life with a smile, but you can go a lot farther with a smile and a gun." [audience laughter]. It's what you can enforce.

Now, what is the point, I might even ask what is the rationality of asking a gangster government, or particular gangsters in the government, to investigate and pass judgment on their own wrongdoing? Do you not already know what they will say? And whatever they say, will you believe them? Do you believe what they have told you about the Oklahoma City bombing? Do you believe what they've told you about Waco? About TWA flight 800? About Mena, Miny, and Mo? [audience laughter]. Well, that raises another question, though. What can common Americans do about this gangster government? After all, it is the government! And it's much more dangerous precisely because it's composed of gangsters.

Well, that's true. But also, this is a government around which hangs the smell of the Nuremburg and Tokyo war crimes trials, which set the precedent for prosecution of gangster governments. Looting a whole country for generations under color of an unratified constitutional amendment, constitutes a crime against the people, if anything does. That this crime is being committed by individuals who happen to hold official positions in the government, Nuremburg and Tokyo tell us, does not attenuate its criminality or immunize its perpetrators. But with all due deference to Dostoevsky, crime is one thing, and punishment is another. And these criminals will never be punished until they are first pulled from office by an educated, disgusted, and incensed electorate [audience applause]. But to strip them of their offices, they must first be tried, and that in the court of public opinion, which is the only tribunal now sitting that will give these charges a fair hearing.

So, in what I call "the program of the four I's," Investigate, Inculpate, Indict, Incarcerate, [audience laughter] the first and most important step must be investigation. The machinery of investigation should center around a Citizen's Constitutional Investigatory Commission, composed of legal scholars, historians, other qualified individuals who are capable of assessing and arriving at correct conclusions from pertinent evidence. This Commission, however, must not seek any governmental direction, assistance, or other involvement. Public officials may appear before it as witnesses, and indeed many should be summoned to testify and to submit documentary evidence. But otherwise, no public official should be allowed to participate in such a Commission's work, as any such connection would raise insoluble conflicts of interest.

The Commission should be empowered to investigate at least four issues.

First, whether the "16th Amendment" was validly ratified in 1913. That will require an in-depth analysis of all the materials that have been collected in The Law That Never Was and whatever else can be assembled and all of the circumstances that led to the generation of those materials.

Second, if the Commission determines that the alleged "16th Amendment" was not validly ratified, the Commission should then determine whether a tax on incomes from individual's labor, professions, wages, and salaries, is a direct tax or an excise tax, as those terms are used in Article I, Section 8, Clause 1, and Article I, Section 9, Clause 4, of the Constitution. That's because, as one of the speakers pointed out earlier today, there is some dispute among the government, and also among constitutional scholars, as to what kind of tax an income tax is. And we're going to cover all the bases, or this Commission should cover all the bases. So such an investigation will entail an in-depth analysis of direct and indirect taxes in English and American Colonial law in the century or so preceding the War of Independence and ratification of the Constitution. Because we want to know what those words meant in 1789, not what they mean today to somebody in the Department of Justice or the Internal Revenue Service.

Third, if a tax on individual income from labor is held to be an excise by the Commission, then the Commission should determine an issue that was also broached earlier this morning, whether such a tax constitutes a badge or incidence of slavery or involuntary servitude, and is therefore unconstitutional under the 13th Amendment. I won't go into this in great detail, but you figure it out. The premise of this tax is that the tax is generated by labor, labor creates this tax. And the tax is taken, in principle, directly from the labor. Which, of course, to the government, has no value except in so far as it produces the wealth that can expropriated. This is precisely the master-slave theory of wealth generation. And I think if one went back to the antebellum American and Colonial literature, you would find a great deal of information on that subject which would verify that interpretation. In any event, that particular issue has to be settled.

And, finally, if the 16th Amendment was not validly ratified, if a tax on incomes from individual labor is a direct tax, or if such a tax is a badge or incident of slavery, then the Commission should determine why officials in all branches of the national government have enforced this tax since 1913, and in particular, why they have done so since publication of The Law That Never Was and all the litigation on the findings in that book brought in public view this issue.

One important aspect of such a Commission's work, would be a comprehensive search for documentary evidence, Federal and state Freedom of Information Acts could be used, national archives, state archives, Presidential libraries, compilations of papers of public figures that are maintained in universities, and so forth and so on, all of those need to be searched.

Another important aspect of the work must be public hearings, hopefully to be held in various places throughout the country, during which testimony will be taken and documentary evidence submitted. This, not only for the Commission's immediate work, but for the purpose of educating people in the various locales about what's going on and what these issues are.

And eventually the Commission should publish its findings, together with all testimony and documentary evidence suitably printed and bound, what, forty, fifty, sixty, a hundred, volumes, right? Reminds me of that wonderful work that was produced in 1945-46, Nazi Conspiracy and Aggression, we could almost use that title. These materials then should be presented immediately to Congress, the Secretary of State, the President, the Chief Justice of the Supreme Court, the Legislatures of the several states that were involved in the ratification of the "16th Amendment". If the Commission's findings establish the tax on individual income from labor is unconstitutional, each of these governmental recipients should be instructed to take appropriate action. Now, you note that the word I use is "instructed." Not, asked, petitioned, begged, or implored. For, faced with findings that the income tax is unconstitutional, theirs will be the constitutional duty to act. I presume, however, being something of a cynic, ... you know people often call me a pessimist. And I like to ask them, you know, what's the definition of a pessimist? A pessimist is an optimist who knows the facts [audience laughter]. I've been in this business a while. And it gets dirtier the deeper you dig. So, I presume, that no matter what findings are presented to these public officials, they will not disestablish the individual income tax on their own, anymore than they would disestablish the Federal Reserve system, simply because someone such as myself proves that the constitutional dollar is a silver coin, not a piece of paper [audience applause]. Or any more than they will give up their fantastic dreams for a New World Order simply because the Declaration of Independence establishes the United States as a nation among nations, not as a satrapy of some global empire [audience applause].

Rather, I anticipate that they will do everything within their power to obstruct, obfuscate, and delay, if not derail entirely, the Commission's investigation, and then to criticize, belittle, and ridicule the Commission's findings. Because, let's face the facts, the income tax is one of the major props of the power structure. Enough said! At that point, though, finally armed with the whole truth on one side, and face to face with the political classes' intransigence on the other, the American people will be forced to decide whether they are sheep or men, whether they can mount a grass-roots political movement to throw these elitists out of office once and for all and reassert self-government in this country, or accept the other alternative.

It will be very interesting to see what happens. Thank you, ladies and gentlemen [audience applause].

[lord edward coke]

http://www.youtube.com/watch?v=d0nERTFo-Sk&feature=PlayList&p=F39E2EBA1A84A860&playnext_from=PL&index=0&playnext=1

http://www.youtube.com/watch?v=mkz9AQhQFNY&feature=related

[lord edward coke]

Mr "Freedom", you loose the point. If I am free, I should not be FORCED, COERCED into using depreciating paper.

Yes, govt could print money without interest BUT, whenever govt did that they abused the power and investors lost confidence so, they decided to partner with private central banks, to provide them legitimacy.

So, I have no problem govt or central banks printing money. What I want is to end legal tender laws that stop me earning and paying in sound money. I don't seek ANYTHING but freedom to choose and the absence of force and coercion.

This is a MORAL issue, that has nothing to do with your reasoning, because free people should be free to choose good and bad currencies and investments and should be free to make their own assessments and judgements. So, you keep your judgement, I'll keep mine.

AGREED, My veiw is government printing worthless paper money is simple counterfit of real value money.

or if i wanted to compete with any 'bank' , my right.

General Overview of the History is certainly not what dreamers think, there is no get rich scheme, But the assets (real) of the World have been hidden from view from 1946 to 1995 and abused by certain countries who would prefer it remained as such. The system is broken and Bretton Woods is a shaddow of what was Agreed! You are not slaves even though governments would prefer you in bondage for their own purposes. To undo 50 years abuse takes time and against the will of those that would prefer to keep you in chains. But knowledge will set you FREE.... What can be made public is the tip of the iceberg so understand this and the knowledge of a few good men can made things start to happen:-

From 1944/5 - 1994/5 The Trilateral Trillenium Tripartite Gold Commission (TTTGC) was organised and implemented, by the Nations of the World, with a Term period of Fifty (50) years. During this term period the Commission held the Mandate, Rights and Authorities over The Combined International Collateral Accounts of the Global Debt Facility. (Note: This Commission should not be confused with the Trilateral Commission that exists today). Following the expiry of the 50 year term, the Nations of the World, disappointed with the biased way The Combined International Collateral Accounts had been utilised within the 50 years, agreed not to extend the term of the TTTGC, but instead appointed a single independent person to the position of International Treasury Controller with full rights, authority, and legal ownership of the Combined International Collateral Accounts.

On January 20th 1995, Dr. Ray C. Dam was appointed International Treasury Controller, and Legal Heir and Owner of the Combined International Collateral Accounts of the Global Debt Facility, with full authority and dispositional control of same, under Legal Decadency RCD 1088, executed by the Nations of the World. Also established on January 20, 1995 was The Office of International Treasury Control, as the management, administrative and operations organization for His Excellency, Dr. Ray C. Dam.

http://tpuc.org/forum/viewtopic.php?f=9&t=13003

[Freeski]

No coersion, period. Simple as that.

[planning4acrash]

The mad thing is that in Britain, we have legal tender tax free gold. No sales tax, no capital gains tax for sovereigns or Brittania's. We here, via common law are free to trade and bater in these coins BUT, the British establishment know that folk prefer to trade in silver for its smaller values so they knew that all they had to do was get rid of silver via bi-metalism. This is a dual gold and silver standard where silver price is fixed to gold price in a way that pushes silver out of the country. Once they had achieved that, we were in an invisible monetary prison.

[lord edward coke]

  Federal Reserve Act - Remedy

http://video.google.com/videoplay?docid=-9010856874304912516&hl=en#

This is the most important vid in this thread.............WATCH every second.

and than do a Search of =   David Merrill  forum   redeem lawful money  - https://us2.ixquick.com/do/metasearch.pl?

This is the solution written into the law Title 12 Section 411.

This has nothing to do with austrian, or your other give big ,government more power solution.

http://www.dailypaul.com/node/851

[planning4acrash]

The ultimate Austrian solution has been put forward by Ron Paul, simply end legal tender laws, which FORCE citizens to use government mandated currency. This will subject currencies to competition and due legal process, tending them towards optimum soundness.

Yes, a gold standard would empower government relative to the end of legal tender laws, but even a gold standard would disempower government relative to the current situation, because they would not be able to inflate the currency.

[Freeski]

The ultimate Austrian solution has been put forward by Ron Paul, simply end legal tender laws, which FORCE citizens to use government mandated currency. This will subject currencies to competition and due legal process, tending them towards optimum soundness.

Yes, a gold standard would empower government relative to the end of legal tender laws, but even a gold standard would disempower government relative to the current situation, because they would not be able to inflate the currency.

No way! FORCE citizens???

[citizenx]

The problem is not fiat money. It is debt money.

[planning4acrash]

The problem is not fiat money. It is debt money.

Yes, fiat money is not a problem, per sai. What is a problem, is that government force citizens to use government issued fiat money, meaning that it is not kept in check by free market incentives for sound money, e.g. competition with sound money like gold, silver and more. In a free market, fiat money would have a role, but it would be a minimal role, kept in check by strong competition from real money.

Ron Paul is right, legal tender laws, that force citizens to use unsound money is the problem.

http://www.lewrockwell.com/paul/paul619.html

[donnay]

Yes, fiat money is not a problem, per sai. What is a problem, is that government force citizens to use government issued fiat money, meaning that it is not kept in check by free market incentives for sound money, e.g. competition with sound money like gold, silver and more. In a free market, fiat money would have a role, but it would be a minimal role, kept in check by strong competition from real money.

Ron Paul is right, legal tender laws, that force citizens to use unsound money is the problem.

http://www.lewrockwell.com/paul/paul619.html

Absolutely! 

[citizenx]

From Wikipedia, the free encyclopedia
Jump to: navigation, search

Gold (pronounced /ˈɡoʊld/) is a chemical element with the symbol Au (from Latin: aurum, "shining dawn", hence adjective, aureate) and an atomic number of 79. It has been a highly sought-after precious metal for coinage, jewelry, and other arts since the beginning of recorded history. The metal occurs as nuggets or grains in rocks, in veins and in alluvial deposits. Gold is dense, soft, shiny and the most malleable and ductile pure metal known. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Gold is one of the coinage metals and has served as a symbol of wealth and a store of value throughout history. Gold standards have provided a basis for monetary policies. It also has been linked to a variety of symbolisms and ideologies.

A total of 165,000 tonnes of gold have been mined in human history, as of 2009. This is roughly equivalent to 5.3 billion troy ounces or, in terms of volume, about 8,500 cubic meters, or a 20.4m cube.

http://en.wikipedia.org/wiki/Gold#cite_note-World_Gold_Council_FAQ-0
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At spot price of approximately 1300$ (1296$/oz.) this equates to 6.9 trillion USD.

Now the world's derivatives markets are (foolishly) valued at 1.5 quadrillion dollars.

If all the world's paper "wealth" had to be backed in gold, the value of gold would have to increase 2,713X.



Thought of another way, if gold was just used to back up the U.S. dollar:

The Fed no longer publishes the M3, but the M2 is currently over 8 trillion USD, so there would not even be enough gold at present prices to back up the dollar at current prices unless we had all the gold in the world, which we definitely do not.  It is questionable whether we have even a fraction of the gold we are supposed to have: both in Fort Knox and the Fed.

Total states U.S gold reserves: 32.15 million USD/tonne (approx.) X 4,176 tonnnes=134 billion USD approx.

So, if dollars were backed up with the gold we supposedly have, gold would have to go up over 60X in value.

In other words converting to gold standard would require/create hyperinflation -- not to say we might not be facing that in the near future anyway.  However, converting overnight while ostensibly a good thing for those who have vast quantities of gold might appear to be a good thing , but it would be disasterous for everybody else.

Bottom line, though, it is completely unnecessary.

additional references:

http://en.wikipedia.org/wiki/Money_supply

http://en.wikipedia.org/wiki/United_States_Bullion_Depository

[planning4acrash]

This is total nonsense. Going to a gold standard would not create hyperinflation, it would result in deflation!! It is gold that is undervalued. Prices today would remain similar, but the price of gold would alter, then prices would begin to deflate as the supply of money became fixed to the price of gold.

[citizenx]

Let's go over this one more time:

M2 alone is over 8 trillion USD.

U.S. gold reserves (stated) are around 134 billion USD.

So, either gold could only be used to back up 1/60 the of the money supply or the price of gold would have to instantly sky-rocket sixty-fold, in other words instant hyper-inflation.
 
It would make a lot of money for the people who are holding gold right now (like the elite) and make life for the rest of us extremely miserable.

OR, here you go, do like North Korea and just have a sixty to one dollar exchange and have the new "dollar" be backed in gold.

(Yes, that is a "Modest Proposal" a la Swift.  Not a serious suggestion.)

Thank God, RP, is no longer on the gold standard band wagon.

Go, Ron.

[planning4acrash]

For crying out loud. It is the elite that run the paper money printing press!! You are paralysed by your fears, like, they run the printing press, go for gold, they have all the gold, lets stay fiat, but they run fiat.

We just need sound money, damn it.

[citizenx]

The gold standard is not the answer.

Doing away with the legal monopoly granted to a private consortium of banks (A.K.A., the "Fed") to create and lend money to the government at interest -- that is the answer.

The government can create its own money without having to borrow it from anyone at interest, or a competitive system could at least be created where more than one bank is allowed to create money such as has been done in the U.K. and was done at one point in our (U.S.) history.

At this point, I favor the former, but I can see very valid reasons being put forth for the latter from a free market economy point-of-view.

[planning4acrash]

That's what I suggested above already.

[citizenx]

That's what I thought.  I think we're basically on the same wavelength.

[planning4acrash]

That's what I thought.  I think we're basically on the same wavelength.

We are on the same wavelength but, a gold standard would be far better than what we have today, even if it isn't the ideal solution. America had huge manufacturing base with a gold standard and that would return with one. Going that step further to a free market in money, ending legal tender laws, would truly set the economy free and end big government once and for all.

[citizenx]

OK, well I do have to disagree with you there.  The gold standard would make things even worse.
-------------------------------------------------------------------------------------------------------------------------

Disadvantages
 
 
...The total amount of gold that has ever been mined has been estimated at around 142,000 metric tons.[31] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $8.3 trillion is in circulation or in deposit (M2).[32] Therefore, a return to the gold standard, if also combined with a mandated end to fractional reserve banking, would result in a significant increase in the current value of gold, which may limit its use in current applications...

...Many economists believe that economic recessions can be largely mitigated by increasing money supply during economic downturns.[36] Following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence monetary policy could no longer be used to stabilize the economy in times of economic recession.[37] Such reason is often employed to partially blame the gold standard for the Great Depression, citing that the Federal Reserve couldn't expand credit enough to offset the deflationary forces at work in the market. Opponents of this viewpoint have argued that gold stocks were available to the Federal Reserve for credit expansion in the early 1930s, but Fed operatives failed to utilize them...

...Monetary policy would essentially be determined by the rate of gold production. Fluctuations in the amount of gold that is mined could cause inflation if there is an increase, or deflation if there is a decrease.[39][40] Some hold the view that this contributed to the severity and length of the Great Depression as the gold standard forced the central banks to keep monetary policy too tight, creating deflation...

...high price volatility. In the United States from 1879 to 1913 the coefficient of variation of the annual change in price levels was 17.0, whereas from 1943 to 1990 it was only 0.88.[40] It has been argued by among others Anna Schwartz that this kind of instability in short term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt...

...Some have contended that the gold standard may be susceptible to speculative attacks when a government's financial position appears weak, although others contend that this very threat discourages governments' engaging in risky policy (see Moral Hazard). For example, some believe the United States was forced to raise its interest rates in the middle of the Great Depression to defend the credibility of its currency after unusually easy credit policies in the 1920s...

...If a country wanted to devalue its currency it would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation...

From wikipedia:
http://en.wikipedia.org/wiki/Gold_standard

[planning4acrash]

OK, well I do have to disagree with you there.  The gold standard would make things even worse.
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You are totally misinformed. America boomed to be the world's largest economy after over 100yrs of a gold standard. The gold standard would contract government and the corporate sector, pushing capital towards small businesses and individuals. You do not know history, and fear the contraction in government and corporations that must occur to recover, like a crack addict to fiat money, you fear going cold turkey. Note, the end of legal tender laws would cause a yet more severe contraction, but it would form an even better basis for a sound economy once the contraction is complete.

Deflation and Liberty: http://mises.org/media/2765